Aug. 6 (Bloomberg) -- Australian house prices rose by the most in more than three years in the second quarter as home buyers responded to a series of interest rate cuts by the central bank since November 2011.
Home prices across Australia’s eight major cities jumped 2.4 percent in the three months to June 30 after a revised 0.8 percent gain in the first three months of the year, according to an index of established homes released by the statistics bureau. The rise was the biggest since the first quarter of 2010, beating the median estimate of 15 economists surveyed by Bloomberg News of a 1 percent increase, and sent the index to the highest level since it was established in March 2002.
The Reserve Bank of Australia, which today continued its easing cycle with a 25 basis-point cut of its benchmark interest rate to a record-low 2.5 percent, is rebalancing the economy toward industries including residential construction as the mining investment boom fades. The cuts have boosted housing demand, with the number of homes available for sale in the biggest cities falling 2.5 percent in July from a year ago, according to real estate data provider SQM Research Pty.
“This is further confirmation that the housing market is starting to stir,” said Matthew Hassan, senior economist at Westpac Banking Corp. “Lower interest rates have been the key catalyst, with the improvement in June, July and August coming after the last interest rate cut in May.”
National Australia Bank Ltd. said it will reduce its variable mortgage rate by 25 basis points to 5.88 percent from Aug. 12, following the central bank’s decision today. Westpac Banking Corp. and Commonwealth Bank of Australia are reviewing their rates, and Australia and New Zealand Banking Group Ltd. will consider its loan rate on Aug. 9, according to the respective spokesmen at the banks. A basis point is 0.01 percentage point.
“It is crucial that banks pass this rate cut on in full to mortgage borrowers,” Shane Garrett, senior economist at the Housing Industry Association, said in an e-mailed release following the rate decision. “Lower interest rates have helped to support a modest though hesitant recovery in residential construction activity.”
House prices in the second quarter rose 5.1 percent from a year earlier, the government figures today showed. Perth had the biggest year-on-year increase, climbing 11 percent, followed by a 7.7 percent gain in Darwin and 6.1 percent in Sydney, according to the data.
House and apartment prices climbed 5 percent as of Aug. 4 from a year earlier, Brisbane-based real estate researcher RP Data said in an e-mailed report today.
To contact the reporter on this story: Nichola Saminather in Sydney at firstname.lastname@example.org
To contact the editor responsible for this story: Andreea Papuc at email@example.com