Aussie house prices rise 5.2%, most in 6 years

Govt grants spur demand among first-time buyers

Australian house prices rose in the three months through December by the most in more than six years as government grants spurred demand among first-time buyers.

An index measuring the weighted average of prices for established houses in the eight capital cities climbed 5.2 per cent from the previous three months, the biggest gain since the September quarter of 2003, the Australian Bureau of Statistics said in Sydney yesterday. The median estimate of 16 economists surveyed by Bloomberg News was for a 3.5 per cent gain.

Last year’s 13.6 per cent surge in house prices is among reasons central bank governor Glenn Stevens is forecast by all 20 economists surveyed by Bloomberg News to raise the benchmark lending rate today by a quarter percentage point to 4 per cent, the fourth increase in five months.

Reports published earlier yesterday showed manufacturing expanded in January and consumer prices rose by the most in six months.

‘The boom in house prices in 2009 is unlikely to be repeated this year as rising interest rates weigh on affordability,’ noted Alex Joiner, an economist at Australia & New Zealand Banking Group Ltd in Melbourne. Prices will gain between 5 per cent and 8 per cent in 2010, the economist added.

The Australian dollar rose to 88.56 US cents at 12:04pm in Sydney from 88.61 cents just before the report was released. The two-year government bond yield was unchanged at 4.2 per cent.

Prices rose the most in Melbourne, gaining 6.8 per cent, followed by a 5.7 per cent advance in Perth, and a 5 per cent increase in Sydney, yesterday’s report showed.

Demand for homes surged in 2010 after the government tripled in late 2008 payments to first-time buyers of new dwellings to A$21,000 (S$26,211), and doubled the grant to A$14,000 for existing homes. Those payments were reduced last month to their original A$7,000.

Source : Business Times – 2 Feb 2010