Australian Second-Quarter House Prices Rise 4.2%
Australian house prices rose in the three months through June for the first time in five quarters as the lowest borrowing costs in half a century and government grants spurred demand among first-time buyers.
An index measuring the weighted average of prices for established houses in the eight capital cities climbed 4.2 percent from the first quarter, when it declined a revised 1.5 percent, the Australian Bureau of Statistics said in Sydney today. The median estimate of 15 economists surveyed by Bloomberg News was for a 2 percent gain.
Central bank Governor Glenn Stevens, who warned last week about the risks of a house price bubble, will keep the benchmark interest rate unchanged at 3 percent today for a fourth month to stoke the economy. House prices may rise further after the government in May extended grants of as much as A$21,000 ($17,800) to first-time buyers.
“The historically low cash rate is becoming increasingly inappropriate,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. “Housing is the primary beneficiary of the 425 basis points of aggressive rate cuts” between September and April, she added.
A separate report showed today retail sales unexpectedly fell in June for the first time in four months as households spent less on clothing and at department stores. Sales dropped 1.4 percent from May, though rose 2 percent in the second quarter from the previous three months.
Currency Rises
The Australian dollar jumped to a 10-month high after today’s reports, reaching 84.71 U.S. cents, and trading at 84.58 as of 12:22 p.m. in Sydney. The two-year government bond yield rose 2 basis points to 4 free business card.42 percent. A basis point is 0.01 percentage point.
Stevens, who will announce the interest-rate decision at 2:30 p.m. in Sydney today, said last week that Australia faces a challenge to ensure the “ready availability and low cost of housing finance” results in the construction of more houses, and “not just higher prices.”
Recent reports show home-loan approvals to buy houses and apartments climbed 2.2 percent in May, the eighth straight monthly gain, helped by record demand from first-time buyers. By contrast, building approvals fell 14.3 percent in June from a year earlier, a report showed on July 30.
‘Disturbing’ Threat
“This ought to be the time when we can add to the dwelling stock without a major run-up in prices,” Stevens said on July 28.
“If we fail to do that — if all we end up with is higher prices and not many more dwellings — then it will be very disappointing, indeed quite disturbing,” and may increase the risk of “problems of over-leverage and asset-price deflation down the track.”
Prices jumped the most in Melbourne, climbing 5.2 percent from the March quarter, followed by Sydney’s 4.9 percent gain, today’s report showed. Canberra gained 3.6 percent and Adelaide 3.4 percent. Brisbane and Hobart both advanced 2.5 percent.
House prices declined 1.4 percent in the year through June, after dropping an annual 6.2 percent in the March quarter, the report showed. Economists forecast a 4.9 percent decrease.
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