Australian house prices unexpectedly rose in the three months through June, ending five straight quarters of declines, as lower interest rates lured buyers.
An index measuring the weighted average of prices for established houses in eight major cities advanced 0.5 percent last quarter from the previous three months, the Australian Bureau of Statistics said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg News was a 0.5 percent fall. House and apartment prices in the cities rose 0.6 percent in July from the prior month, when they rose 1 percent, the RP Data-Rismark home value index, also released today, showed.
The data reflect 1.25 percentage points of rate cuts by the Reserve Bank of Australia since November as inflation slowed. Governor Glenn Stevens has indicated that the reductions in the benchmark to 3.5 percent are designed to help strengthen the economy as Europe’s crisis worsens, and to help households pay down debt, rather than stoke another boom in the housing market.
“Borrowing costs are now below average and it appears that’s beginning to support demand,” said Janu Chan, Sydney-based economist at St. George Bank Ltd., which predicted the 0.5 percent gain. “There has been a pickup in the number of first-home buyers, and that’s important in a recovery for housing because that adds liquidity to the market.”
Prices rose 1.4 percent in Sydney, 0.6 percent in Perth and 5.1 percent in Darwin in the second quarter from the first three months of the year, and declined 0.4 percent in Melbourne and 1.3 percent in Canberra, the statistics bureau report showed. They dropped 2.1 percent from a year earlier across the nation’s biggest cities, it said.
The local dollar traded at $1.0481 at 12:12 p.m. in Sydney, compared with $1.0468 before the report.
The increase comes after house prices fell a revised 0.1 percent in the first three months of 2012, from an initially reported drop of 1.1 percent, according to statistics bureau figures.
“The July result, when viewed together with the positive June result, suggests housing markets may be starting to respond to lower mortgage rates,” RP Data research director Tim Lawless said in the report.
A private report on Australian sales of newly built homes rose in June for a third-straight month.
Sales increased 2.8 percent to 6,021 from May, when they gained 0.7 percent, the Canberra-based Housing Industry Association said on July 30, citing a survey of the nation’s largest builders. Detached house sales rose 0.7 percent, while apartments soared 15.7 percent, it said.
Stevens said in June his decisions to cut rates by 25 basis points in November and December, 50 basis points in May and another 25 in June were made easier by the board’s judgment that there was a low risk of reigniting a boom in borrowing and home prices. The board paused last month at 3.5 percent.
“One thing we should not do, in my judgment, is try to engineer a return to the boom,” he said in a June 8 speech in Adelaide. “The intended effect of recent policy actions is certainly not to pump up speculative demand for assets.”