A chronic shortage of houses, a strong economy and rising demand driven by population growth combined with the last throes of the First Home Buyers Grant boost see more home prices rises.

The data come just a day before the Reserve Bank meets to discuss interest rates. It is widely expected the central bank’s board will lift rates by a quarter of a percentage point tomorrow – and today’s housing figures are likely to add impetus to the rate-rise cycle that began last month.

The home price index jumped by 4.2 per cent in the three months to September, matching the rise in the previous quarter, but vaulting 2.6 per cent higher than the index’s previous peak in the first quarter of 2008. The September quarter rise was much higher than analysts’ expectations of a 3 per cent gain.

Year-on-year, home prices shot up by 6.2 per cent in the 12 months to September, the Australian Bureau of Statistics figures show. Economists had tipped a 4.3 per cent increase for the year to the end of September. In the year to June, the index fell 0.7 per cent, half the fall posted prior to a revision recorded in the latest figures.

“These strong results will be seen as validating RBA concerns that ultra-low rates may be triggering another house price boom, adding to their comfort in reversing policy stimulus at a fair pace,” said 4Cast Ltd chief economist Ray Attrill.

Home prices increases, driven by a shortage of available homes, population growth and a resilient Australian economy – which has avoided the recession triggered by the financial crisis elsewhere – have combined to push up home prices and whet the appetite of buyers.

In recent months, the Reserve Bank has said it is considering rising home prices and worsening affordability as factors in considerations on interest rates and monetary policy.

Rates

Tomorrow the bank’s board will meet to consider interest rates. It is widely expected the board will push the official cash rate up by at least a quarter of a percentage point.

That would take the rate to 3.5 per cent, effectively adding another $45 to the monthly mortgage repayment on an average $300,000, 25-year loan.

“First home buyers have really kept house prices afloat at low to middle end of the property price spectrum since October last year,’’ said JP Morgan economist Helen Kevans.

“What we do expect is that those house price gains will still probably moderate as the (Federal) Government stimulus is withdrawn.”

State by state

House prices in Melbourne increased the most, 4.7 per cent in the quarter, while Perth house prices rose 4.5 per cent in the same period, the ABS said.

Brisbane house prices jumped 4.4 per cent and Sydney’s increased 4.3 per cent, the same change as Canberra’s.

House prices in Darwin rose 3.4 per cent, while Hobart’s increased 1.8 per cent. Adelaide’s rose the least of the eight capital cities, only 1.7 per cent.

Affordability

“The housing industry and the policy authorities face a considerable challenge in the years ahead to deliver an adequate physical supply of housing,” said ANZ head of property analysis Paul Braddick. 

Rental vacancies remain near record lows while rents are rising sharply, he said.

Expanding migration to Australia pushed population growth to 2.1 per cent in the year to March, with an additional 439,000 people in the country, Mr Braddick said.

Dwelling completions are forecast to fall below 130,000 in the year ahead, he said, which foreshadows a further “dramatic tightening of the housing demand-supply balance”.

Mr Braddick said higher interest rates will weigh on a fragile building upturn but in the medium term, “unless significant action is taken to remove the structural impediments to housing supply, Australia will face an intractable shortage of housing that will drive a deterioration in housing affordability-both purchase and rental – beyond anything we have ever seen before”.

Source: www.thedomain.com.au

THE REIV’s September Quarter Property Update shows the median price of a Melbourne house has reached $480,000, an increase of 6.7 per cent since the June quarter and a record.

Key factors influencing the result include improved confidence in the Victorian economy and ongoing population increases stimulating demand for housing.

The results have also been analysed by the method of sale, comparing houses or units that were sold by auction and those sold by private sale.

With about 70 per cent of all houses in Victoria sold by private sale, analysis of the broad outcomes from the different methods can provide prospective vendors with an additional piece of useful information when considering the sale of their own home.

In reviewing the statistics, it should not be assumed the results apply to all properties; rather, they are an indication of differences between demand in different market segments.

During the quarter, the best appreciation was recorded in detached houses sold at auction.

The median price of a house sold by auction increased by 6 per cent in the quarter, from $585,000 to $620,000; houses sold by private sale recorded a 3.1 per cent increase, from $411,900 to $424,500.

This highlights the fact that the more expensive the house, the more likely it is to be sold by auction than private sale.

Similar results were recorded for units and apartments.

The median price of a unit or apartment sold by auction increased by 4.9 per cent from $432,000 and by 2.9 per cent from $375,000 when sold by private sale

Source: www.theage.com.au

Melbourne properties staged a stunning performance during the first seven months of the year with median prices jumping by a whopping 8.5% to $454,524 according to RP Data-Rismark International’s Home Value Index.

Sydney properties also grew solidly, albeit slower compared to Melbourne. Median price climbed by 6.64% during the same period.

” Melbourne’s median value is 19% or $112,000 lower than Sydney house values, reflecting a significant value differential. This maybe one of the reasons why Melbourne’s housing performance has been so strong,” the report said.

Darwin continued to out perform the rest of Australia,racking up 10.8% growth in value over the first seven months of 2009. Darwin also recorded the highest gross rental yield – 6.4% for houses and 6.2% for units – followed by Canberra, with houses up by 4.9% and units by 5.6%.

Sydney’s house prices remain the highest of the capital cities, averaging $537,396, while Perth ranked second at $481,493 and Canberra third, at $477,627.

The weakest performing house prices were found in Adelaide with values up only 1.9% in 2009. Melbourne recorded the lowest house rental yields at 4.1% and matched Perth’s 4.6% increase in unit yields.

The REIV has released its September Quarter Property Update which shows the median price of a house in Melbourne reached $480,000, an increase of 6.7 per cent since the June quarter.

REIV CEO, Enzo Raimondo said that improved confidence in the Victorian economy combined with ongoing population increases has resulted in a new record quarterly median price.

 “The recovery in the property market is widespread with record demand in the city’s most prestigious suburbs as well as its most affordable ones. 

“Individual monthly results also show ongoing and sustained increases over the quarter which indicates demand will continue to push prices up through October, November and December.

“The improved confidence in the economy has revealed the underlying issue; a lack of supply, both for purchasers and renters. Unless there is a sustained increase in supply the REIV expects further pressure on prices.

 “Surrey Hills has recorded the largest increase in its median this quarter, increasing by 24.6 per cent from $905,000 to $1,127,500. The median price in Surrey Hills fell below a million dollars due to the global financial crisis in 2008 but like many other suburbs it has now reached a new high.

 “Pascoe Vale also recorded a very strong increase in demand, its median rose by 23.7 per cent from $485,000 to $600,000. Strong demand for traditional detached homes in similar middle ring suburbs such as Thornbury, Highett, Doncaster East, Nunawading and Bentleigh East was also recorded.

“This result comes as no surprise, in the auction market the REIV has recorded 23 weekends in a row with a clearance rate in excess of 80 per cent. This has been a very good period for vendors but is not sustainable.

“The median price for a unit or apartment has increased by 5.1 per cent in the quarter from $390,000 to $410,000 – the first time it has exceeded $400,000.

 “Key regional city’s, Greater Geelong, the City of Ballarat and Greater Bendigo have all recorded increases over the last 12 months.

“The market has clearly recovered from very challenging times over the last 12 months however the challenge of ensuring adequate supply of homes for owner occupiers and renters will dominate the market in the next 12 months,” Mr Raimondo said.

Source: REIV

The word ‘consistent’ could be used to describe the performance of the Melbourne residential property market this year.

According to REIV research the last time the weekend auction clearance rate was below 80 per cent was in early May, 22 weeks ago.

In that time the clearance rate has been between 81 and 86 per cent each weekend. Over the same time last year the clearance rate moved between a low 59 and 68 per cent.

A direct comparison between last weekend and the same one last year helps to show how much the market conditions have improved.

On the 11th and 12th of October last year there were 577 auctions reported, of which 356 sold resulting in a clearance rate of 62 per cent. The total dollar value of those transactions was $193 million. There were also 572 private sale results resulting in a total value of $218 million being sold. 

Last weekend there were 599 auctions reported of which 492 sold resulting in a clearance rate of 82 percent – 32 per cent better than last year. The total dollar value of those transactions was $348 million. There were also 759 private sale results resulting in a total value of $348 million being sold. This comparison shows that not only is the clearance rate higher but there are substantially more homes being sold by private sale, another consistent trend for the year.The year to date clearance rate, currently as 81.4 per cent is almost identical to the one recorded last weekend.

The ongoing strong results from the property market are a reflection of the health of the Victorian economy and they are expected to continue as long as the current situation prevails.

Source: REIV