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Australian House Prices Fall for Fifth Straight Quarter

Australian House Prices Fall as Higher Rates Weaken Demand
A pedestrian walks past property listings displayed in the window of a real estate agency in Sydney. Photographer: Ian Waldie/Bloomberg

Australian house prices declined in the three months through March in the longest losing streak in at least a decade as the central bank maintained the highest borrowing costs among major developed nations.

An index measuring prices for established houses in eight major cities dropped 1.1 percent last quarter from the previous three months, when it fell a revised 0.7 percent, the Australian Bureau of Statistics said in Sydney today. House and apartment prices slumped 4.5 percent in the eight cities in April from a year earlier, according to real estate researchers RP Data and Rismark International.

Reserve Bank of Australia Governor Glenn Stevens unexpectedly cut the benchmark interest rate by half a percentage point to 3.75 percent today, the deepest reduction in three years. Only two of 29 economists surveyed by Bloomberg News predicted the move, while the other 27 forecast a quarter-point reduction. Stevens reduced borrowing costs in November and December, to 4.25 percent, to buttress the housing market, support jobs and boost confidence among consumers who are saving more.

“There remains little evidence that rate cuts by the RBA late in 2011 have helped to prop up the housing market,” Celeste Tay, a Singapore-based economist at 4cast Ltd., said in an e-mailed message. “We expect the fall in house prices will find some sort of base in the second half of this year on the lagged effect of monetary stimulus as well as better house price affordability.”

Bank Rates

Commonwealth Bank of Australia and Westpac Banking Corp., the nation’s two largest mortgage lenders, are reviewing their interest rates, spokesmen for the lenders said.

Australia’s four biggest banks have this year increased their standard variable home-loan rates, even as the central bank remained on hold, citing higher funding costs.

“Banks must mirror the cut in official rates to help new home buyers as well as providing relief for existing homeowners,” Wilhelm Harnisch, chief executive officer of industry group Master Builders Association, said in an e-mailed statement. “There would be no justification for the banks to delay or withhold the reduction in the official cash rate.”

Homes for Sale

Australian homes for sale jumped “dramatically” by 5.4 percent in March to a four-month high, Sydney-based SQM Research said last month. Sales of new homes dropped 9.4 percent in March to a record low, according to the Housing Industry Association.

The new home sale figures point to “ongoing deterioration in already very weak new home building conditions,” Harley Dale, chief economist at the HIA, said yesterday. “That situation is in turn having a major negative impact on manufacturing and services sectors.”

Australian manufacturing fell to the lowest level in seven months in April, as the sustained strength of the local currency hurt exports, a private survey today showed. A gauge of employment fell 5.2 points to 46.1 in April, while new orders slid 6.2 points to 42, the report showed.

Arrears of 30 days or more on loans that back Australian mortgage bonds jumped 21 basis points, or 0.21 percentage point, to 1.84 percent in January, the highest level in three years, Standard & Poor’s said in a report today. The proportion of sub-prime borrowers who were late with payments rose 86 basis points to 11.95 percent, the report showed.

Home Prices Fall

Home prices fell 2.2 percent in Melbourne and 1.8 percent in Sydney in the first quarter, the statistics bureau report showed. Hobart recorded the biggest decline, at 2.7 percent, it showed. Prices jumped 4.4 percent in Darwin and gained 1.1 percent in Perth, it showed.

Prices of detached houses across Australia’s capital cities dropped 4.7 percent in April from a year earlier, while apartment prices fared better, falling 3.1 percent, according to the RP Data-Rismark report.

A jump in home prices was among reasons Stevens increased the benchmark rate by 175 basis points from October 2009 to November 2010.

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