Rate cuts push house prices higher
AAP and Lisa Llewellyn
Capital city house values are on the up, with interest rate cuts from May and June continuing to kick in, according to the latest RP Data Rismark Home Values Index.
Values rose two per cent in the September quarter, the biggest quarterly jump in two years. The Home Values Index revealed that house prices rose 1.4 per cent in September – the largest monthly increase since March 2010.
On a quarterly basis, house prices in Australia’s eight capital cities rose two per cent. Leading the way was Adelaide, with rises of 2.4 per cent, followed by Perth (1.6 per cent), Sydney (1.5 per cent), Melbourne (1.4 per cent) and Brisbane (1.1 per cent). Conversely, Hobart, Darwin and Canberra all reported falls – by 0.2 per cent, two per cent and 0.6 per cent respectively.
The result suggests that the weakness in the housing market from earlier in the year has since dissipated.
According to RP Data research director Tim Lawless, improvements in the market since mid-year were linked to the Reserve Bank of Australia’s cash rate cuts in May and June.
“It’s no coincidence that housing market conditions bottomed out at the end of May, after the Reserve Bank cut the official cash rate by 50 basis points,” Lawless said. “A further cut of 25 basis points in June and the anticipation of further rate cuts in the pipeline appear to have instilled renewed confidence in the housing market, which has driven the growth in home values.”
CommSec economist Savanth Sebastian said he believed house prices would continue to rise.
“Not only has there been a modest pick-up in activity across the sector, but rental vacancy rates remain low,' he said.
“In fact, total returns on residential property were up a healthy 3.1 per cent in the year to September despite the significant weakness in other asset classes like shares.
“While builders will continue to compete hard for available work, home owners are likely to see the value of their homes rise over the year.”