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Developers like AV Jennings, Australand and a host of their competitors don’t need statistics to tell you how bad the Sydney property market is and NSW for that matter.

Developers are abandoning the state for Victoria and Queensland or de-emphasising the importance of housing in the state while pursuing other projects, such as small shopping centres and commercial properties.

There’s just no certainty in NSW or Sydney, which is hurting the housing industry across the board because the state (and Sydney in particular) is the biggest market in the country (like it is for so many domestic activities)

Sydney’s underperformance is showing up in official figures which measure house price movements.

The Australian Bureau of Statistics (ABS) said yesterday that average house prices grew by an average 1.1 per cent across the country in the first three months of 2007, but Sydney house prices again struggled to the point where they went backwards.

The ABS said its House Price Index, which takes the average of the nation’s eight capital cities, grew 8.6 per cent in the 12 months to March (which nearly matches the growth in the dollar value of retail sales. That’s not an accurate comparison but more confirmation of how sweet the economy is at the moment).

But prices in the nation’s biggest housing market in Sydney fell by an average 0.4 per cent in the first quarter, and grew at just 1.5 per cent over the year to march.

Here’s a perfect example of why accepting a takeover offer early (as many did in Qantas) can be self-defeating.

Hong Kong-based private equity group, Affinity Equity Partners (AEP) says it is offering $6.20 a share for the 16.4 per cent it doesn’t own in Brisbane-based retailer, Colorado Group.

The announcement came late Tuesday night as the country was preoccupied by the Federal Budget. When a trading halt ended yesterday the shares rose $1.09 to $6.02.

AEP’s Australian arm Australian Retail Holdings (ARH) said it believes “its offer provides the existing minority shareholders in Colorado with a compelling opportunity to crystallise substantial value from their shareholding without exposure to the significant execution risks faced by Colorado in implementing its current business strategy”.

This means they REALLY want CDO minorities to sell their shares.

The offer saw the CDO board call off a shareholder meeting yesterday that was going to consider a 52c a share capital return ($49.9 million), which would have benefited AEP with its 83.6 per cent stake in the retailer, and Solomon Lew, who holds a blocking 10.9 per cent stake.

The offer price is a 26 per cent premium to the closing price on Tuesday and a substantial amount above the cash price of $4.18 and 52c special dividend paid last October in the first offer last year.

That totaled $4.70 a share which was a substantial premium in itself above the CDO share price before the bid from AEP, which was notable for being the first hostile bid in this country from a private equity buyer who normally like to ‘hug’ and ‘hold ‘ their targets.

By holding out the prospect of a big gain, AEP is hoping to lure Lew into selling, but going by his stance at Country Road where he has remained a ‘locked’ in shareholder with around 12 per cent and an irritant for the South African owners, I wouldn’t be betting on him accepting too quickly.

After all he doesn’t need the money having sold his stake in Coles to Wesfarmers for more than $1.1 billion for his main company, Premier Investments.

In calling the now postponed meeting, Colorado said its capital structure was inefficient and the AEP local subsidiary ARH proposed the 52c a share capital return to create a more efficient capital structure for CDO.

CDO was in the process of completing a term debt facility to repay the $49.9 million borrowed from ARH to fund the share special dividend paid to shareholders on 6 October 2006.

The faint signs of recovery in the Australian home building market seem to have disappeared once again with the news of a sharp drop in March approvals, thanks to a slump in flats and home units.

The 2007-08 Federal Budget won’t cause too many problems.

Budget time tonight and it is really going to be a case of look for the fiscal measures because monetary policy has already been taken care of by the Reserve Bank and there are no nasties lurking anywhere, except if Mr Costello and Mr Howard prove to be too generous.

Qantas and not the Federal Budget tomorrow night will overshadow the market today and probably for the next few days while the tension is taken out of the share price.

Investors will be wondering what it means and whether it will damage overall market sentiment.

In contrast the bullishness of the Budget has already been factored in after the Reserve Bank’s good report card last week.

Certainly we have seen big takeover deals fall over in the past: Flight Centre’s attempt to go private with private equity buyers was one instance, while the takeovers for Colorado Group and Pacifica both fell short.

Flight Centre shares late last week regained the $17.20 price in the first offer: now that the private equity buyer is back with another proposal and with improving business conditions, the rejection of the offer by fund manager, Lazards, has been justified.

And with the likes of APN News and Media and Rinker facing shareholder opposition to their buyouts or takeovers, no one can discount those deals falling over.

But after Friday’s finish at yet another record of 6296, up 2.5 per cent, the opening today is going to be considerably less certain.

Leads from overseas from Wall Street and commodity prices won’t be enough to offset the uncertainty the Qantas bid situation has caused.

The US job creation machine closed to its weakest growth rate for more than two years in April: just 88,000 new jobs created, half the 177,000 created in March. The unemployment rate rose to 4.5 per cent from 4.4 per cent.

The Dow Jones closed 23 points higher at 13,264, in its fourth record close in a row. The Dow has now risen in 23 of the last 26 sessions, marking its longest bull run since the summer of 1927, according to US market watchers.

We all know what happened in the autumn of 1929!

The broader S&P 500 rose 3 to 1,505.The S&P 500 is not far from its all-time high of 1527.46 hit reached March 2000 at the end of the great tech boom.

The Nasdaq rose 6 to end at 2,572 a six-year high.

For the week, the Dow rose up about 1.1 per cent, the Nasdaq gained 0.6 per cent and the S&P about 0.8 per cent.

This week will be dominated by the Federal Reserve’s policy statement as well as reports on retail sales and wholesale inflation figures.

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Have no doubt, the Australian economy is now well positioned to continue its 16 year expansion well into its 17th and perhaps 18th successive year, unless we do something really stupid to blow it.

In its own, highly conservative way, the Reserve Bank has indicated there are no real barriers to the expansion continuing: only a wages break out financed or run by profligate companies, governments, or a surge in demand from an out of control Chinese economy, can wreck the expansion.

(The biggest unknown though is what happens if the Chinese economy continues to grow at breakneck pace, with domestic asset booms, over investment and despite more rises in interest rates and reserve deposit ratios? Financial chaos?).

In its second quarterly Monetary Policy Statement, issued on Friday, the RBA explained why interest rates didn’t move last week and laid out a fairly convincing case why there will be no need for a move for at least a year and possibly longer, if things don’t happen out of the blue.

Inflation has fallen faster than the RBA thought in February in its first statement for 2007, economic activity has picked up (as evidenced by stronger retail sales and a tentative rebound in some parts of housing), the terms of trade will decline this year, thanks in part to the stronger Australian dollar, and inflation in 2008 and 2009 is now seen as a bit lower than previously thought.

So all that speculation about interest rates will disappear for a while, although with March retail sales and building approvals out tomorrow (and will be overshadowed by the Federal Budget) and April Labour Force figures on Friday, it will be interesting to read the commentary from the analysts and others.

Normally stronger figures for any or all three sets of stats would be enough to bring the line ‘interest rate rise looms’ out of storage.

But with the RBA fairly firming shoving a rate rise off the agenda for sometime, there will be no mileage in adopting the chicken little approach to economic commentary (rate rise looms!).

These figures and especially retail sales, will be handy updates on how some key sectors in the domestic orientated part of the stockmarket are traveling: the retailers and the building supplies and homebuilders.

David Jones will release its third quarter sales on Wednesday and these will help fill out Tuesday’s ABS numbers in the department store sector.

For those really interested, comparing the outlook commentaries from federal treasurer in the budget papers, and the RBA’s MPS of last Friday will be instructive.

By issuing its statement ahead of the Budget the RBA has quietly asserted its policy dominance and revealed a forecast against which all other forecasts (from treasurer for example) will be compared.

And finally what now for the Australian dollar?

It pushed back over 82 USc on Friday night as the US dollar fell on that mixed economic news but it is now a fair way short of those 17 year highs reached in April of well over 83 USc (and closer to 84 USc).

Once the market had scanned and digested the RBA MPS on Friday the dollar was sold off by around half a cent or so on Friday afternoon and it fell well under 82 USc.

An attempt by Wesfarmers to snatch a greater stake in Coles Group has failed and lifted the potential bid price closer to $18 a share.

Anyone who doesn’t think the Chinese authorities are having trouble controlling the country’s surging economy had better think again.

News of a sluggish first quarter growth rate and renewed Middle East tensions, this time in Saudi Arabia, put some spark into commodity prices after they had been heading for a poor finish to the week.

The US economy is entering probably its most crucial period since the big slump back in 2000-2001.

Situations from Qantas, to Rinker, Alinta and Flight Centre, not to mention Coles, will dominate the market this week in Australia as investors give every sign of wanting to take profits.

The rise of the Australian dollar doesn’t only make foreign travel and imports more attractive, foreign shares, especially ones classified as ‘global’, have become more interesting to some investors.

The Australian uranium industry might be about to join the rest of the resources sector in having a free hand to explore, mine and sell its core mineral if this weekend’s Federal ALP conference votes to lift the party’s bans on any more than three mines.