Australian House Prices Fall Most Since 2008 on Higher Rates
Australian house prices declined in the first quarter by the most since 2008 as higher borrowing costs curbed demand and floods disrupted the property market in Queensland state.
An index measuring the weighted average of prices for established houses in eight major cities slid 1.7 percent from three months earlier, the biggest fall since the third quarter of 2008, the Australian Bureau of Statistics said in Sydney today. There was a decrease in transactions in Queensland’s capital, Brisbane, it said.
Reserve Bank of Australia Governor Glenn Stevens has held rates at 4.75 percent for the past four meetings to help Queensland’s economy recover from flood and cyclone damage. He said after last month’s decision that borrowing costs are “a little above average levels” after seven increases from October 2009 to November last year.
“Conditions were particularly dire in Queensland, with floods early in the quarter, followed by the associated clean-up, bringing housing-market activity there to a standstill,” said Ben Jarman, an economist at JPMorgan Chase & Co. in Sydney. “Previous interest rate rises -- and importantly the prospect of more to come -- are keeping prospective buyers sidelined.”
The median estimate of 17 economists surveyed by Bloomberg News was for a 0.5 percent fall. Prices dropped 0.2 percent from a year earlier.
Prices fell the most in Melbourne and Brisbane, with declines of 2.5 percent from the prior quarter, while Sydney fell 1.8 percent, today’s report showed. Prices advanced 0.5 percent in Perth and Hobart house prices gained 0.4 percent.
Record Currency
After the report, Australia’s currency was little changed. The local dollar traded at $1.0933 as of 1:00 p.m. in Sydney, from $1.0959 before the data. The so-called Aussie earlier reached $1.1011, the highest since exchange controls were scrapped in 1983.
A jump in home prices was among reasons Stevens increased the benchmark rate by 175 basis points from October 2009.
Stevens has said the central bank’s management of the biggest mining boom in a century has been aided by households restraining spending. Savings as a share of disposable income climbed to 9.7 percent from October through December, from 8 percent in the year-earlier period, according to Bureau of Statistics data.
The RBA’s quarter-point increase in November was followed by larger rises in the standard variable home-loan rates of Westpac Banking Corp., National Australia Bank Ltd., Australia & New Zealand Banking Group Ltd. and Commonwealth Bank of Australia.
Twenty-one of 22 economists surveyed by Bloomberg News predict Stevens and his board will leave the overnight cash rate target at 4.75 percent when the board releases a policy statement tomorrow.
To contact the reporters for this story: Michael Heath in Sydney at mheath1@bloomberg.net;
To contact the editor responsible for this story: Stephanie Phang in Singapore at sphang@bloomberg.net
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