SYDNEY, Oct 1 (Reuters) – Australian home prices enjoyed their biggest monthly jump in 2-1/2-years in September with the dominant markets of Sydney and Melbourne bouncing strongly, aided by record low interest rates and looser lending rules.
Tuesday’s data from property consultant CoreLogic showed home prices across the capital cities rose 1.1% in September, while values for the nation as a whole gained 0.9%, the biggest jump since March 2017.
The price revival will help end two years of continuous declines which ate away household wealth and confidence in a blow to consumption and the broader economy.
It could also prove a blessing for the construction sector which has seen a severe downturn in new home approvals, particularly for the once red-hot apartment sector.
The Sydney and Melbourne markets each saw price jumps of 1.7%, more reminiscent of the bubble days of 2016.
On a year-on-year basis, Sydney prices were still down 4.8%and Melbourne down 3.9%, but that was a major improvement from the double-digit annual declines clocked earlier this year.
“Although housing values are now consistently tracking higher, at least at a macro level, the national index remains 6.8% below the October 2017 peak, indicating that buyers still have some time to take advantage of improved housing affordability,” CoreLogic research director Tim Lawless said.
The Reserve Bank of Australia (RBA) cut interest rates in both June and July to an all-time low of 1% and is seen likely to ease policy again for the third time this year when the board meets later in the day.
While a revival in the housing market could help lift consumption in Australia’s A$1.95 trillion ($1.3 trillion)economy, any frothiness would pose a policy challenge for both the RBA and the country’s banking regulator.
The recent uptrend has led economists at RBC to raise their forecasts for Australia’s house prices to an annualised rate of 6-8% growth in the coming quarters, up from 4%.
However RBC’s Su-lin Ong said she doesn’t expect the gains to be sustained, citing still modest property listings and turnover as well as rising unemployment, among other factors.
“Indeed, the more challenging scenario for the RBA in 2020 would be the persistence of sub-trend growth, sub-target inflation and a weaker labour market while house prices stay well above nominal (output) growth and the cash rate reaches the lower bound,” Ong said.
The revival in housing prices has also sparked a debate on affordability. A CoreLogic survey on Friday showed the proportion of Australians who think they will be at least 30 years old before leaving their parents’ home has rocketed to 34% from 20% in 2017.
Source: https://www.reuters.com/article/australia-economy-houseprices/australian-home-prices-rise-most-in-2-1-2-years-sydney-melbourne-lead-idUSL3N26L1BK?fbclid=IwAR2gnTz0GKIkDqbVGkzSyqt6DeiOM5gfKnZh0RCwQ0n61VFzv9OMtS_2OIw
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