The extraordinary growth in house prices in Australia’s capital cities over the past year has resulted in the value of an average home in Melbourne rising by nearly $98,000.
In Sydney, the price increase for an average home peaked even higher, above $104,000.
House price figures for eight capital cities released by the Australian Bureau of Statistics yesterday show year-on-year growth from June 2009 of 24.3 per cent in Melbourne and 21.4 per cent in Sydney.
A 24.3 per cent rise above the median Melbourne house price of $403,000 for June 2009 equates to an annual increase of $97,929. Similarly, a 21.4 per cent rise above Sydney’s median 2009 June price of $490,000 equates to $104,860.
The figures provide welcome news for first home buyers, indicating the growth in property prices has peaked and is now declining.
Melbourne prices grew by 3.6 per cent over the June quarter compared with growth in the March quarter of 6.7 per cent.
Economists suggest property prices are likely to flatten, rather than decline significantly, and then remain stable.
”It’s still pretty incredible growth, given we have had six cash rate increases,” Nomura Australia economist Stephen Roberts said. ”That tends to rule out any relief from lower interest rates, too, for some time. The last thing this housing market needs is any stimulus from lower rates.”
Economist Saul Eslake from Melbourne’s Grattan Institute said the ABS figures confirmed data released last Friday that showed property prices declining in June. ”It’s consistent with all the other evidence of lower clearance rates and lower volumes,” he said. ”A lot of the heat that was in the market when interest rates were lower and when there was more government support in the form of grants has now dissipated.”
Overall, Australia’s house price growth slowed less than expected in the June quarter. Economists were predicting growth of 2 per cent but capital city house prices rose 3.1 per cent, following a revised 4.2 per cent rise in the March quarter, according to the ABS.
Economists suggest demand may continue to keep prices stable, with 200,000 new homes needed to house Australia’s growing population.
This comes despite dwelling approvals posting a surprise 3.3 per cent fall in June and the volume of new home sales also declining.
Brisbane recorded the slowest property growth rate with an 8.5 per cent increase. Canberra prices rose 19.6 per cent, Darwin 14.6 per cent, Adelaide 11.6 per cent and Hobart 10.8 per cent, the ABS data shows.
The combination of growth in house prices, a strong labour market, the push for wage increases and other inflationary factors was likely to add to the case for the Reserve Bank lifting interest rates towards the end of the year, Mr Roberts said.
House prices were also affecting other parts of the economy. Households forced to pay off large mortgages were ”scrimping and saving”, which was affecting other sectors such as retail sales, he said.
Story by Simon Johanson www.domain.com.au