SYDNEY: Australian house prices have risen for the 10th straight quarter led by another outsized gain in Sydney, adding to concerns about an overheating market and diminishing affordability in the city.
The data from the Australian Bureau of Statistics showed prices across all the major cities rose 1.6% in the three months to March, lifting annual growth to 6.9%.
The heat was again very much concentrated in Sydney where prices were up over 13% on the year, and that was before the Reserve Bank of Australia (RBA) cut interest rates to a new low of 2% in May.
More timely data from the housing industry had hinted at a cooling down over the last month or so, partly due to the onset of winter. Yet the latest survey from property consultant CoreLogic RP Data found a sudden rebound last week.
Average values across the state capitals rose 1%, from the previous week, with Sydney alone up 1.6% and Melbourne 1.4%.
Annual growth in prices picked up to 9.l% nationally and a frothy 15% in Sydney.
Demand was also strong with almost 84% of home auctions in Sydney proving successful, and 79% in Melbourne.
Some increase in prices was always necessary to drive a much-needed revival in home building. And it’s working with approvals to build new homes at a record high, providing jobs and supporting economic growth.
But speculative demand has grown so fierce in Sydney it prompted RBA governor Glenn Stevens to label it “crazy”. The central bank fears it could ultimately push prices to peaks that threaten a vicious pullback.
“It puts the RBA between a rock and a hard place on rates,” said Diana Mousina, an economist at Commonwealth Bank.
“You can’t tailor monetary policy just for one city, so they must be really hoping tighter rules on lending and foreign property buyers can calm Sydney and not tie their hands.”
Regulators have tightened their coverage of lending standards for property investment and there are tentative signs banks are slowing growth in their mortgage books.
Affordability, or rather the lack of it, has also become a political hot potato. Treasurer Joe Hockey drew much criticism this month when he advised would-be buyers in Sydney to “get a good job that pays well” as the first step to owning a home.
The media is full of stories of suitcase-sized apartments fetching truck loads of cash or 100-year-old houses going for far above the reserve price at auctions.
Lawmakers have launched their own inquiry into affordability which kicks off with a public hearing on Friday seeking policies to allow all Australians to have a “fair chance” to own a home. – Reuters