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Australia home prices off to flying start in January, Sydney soars

Wednesday, February 1, 2017 - 07:34

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Australian home prices posted yet another jump in January, starting the New Year on a high note for the sizzling markets of Sydney and Melbourne.

[SYDNEY] Australian home prices posted yet another jump in January, starting the New Year on a high note for the sizzling markets of Sydney and Melbourne.

Property consultant CoreLogic said its index of home prices for the combined capital cities climbed 0.7 per cent in January, slowing from December's 1.4 per cent gain, but faster than the readings for October and November.

Annual growth in overall prices stood at 10.7 per cent, not far from 2015's lofty peaks atop 11 per cent.

The trend will be a worry for the Reserve Bank of Australia (RBA) which had been hoping the market would cool after regulators imposed tighter lending rules on banks.

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After cutting interest rates to a record low of 1.5 per cent last year, the central bank has appeared reluctant to ease further in part because it could encourage more borrowing by already heavily indebted households.

The CoreLogic data showed home prices in Sydney kept up their blistering run with a rise of 1 per cent in January from December. The annual pace of growth also spurted to 16 per cent, from 15.5 per cent.

In contrast, Melbourne prices rose 0.8 per cent, from a sharp 3.1 per cent in December. Annual growth slowed to 11.8 per cent, from 13.7 per cent.

Home values in Sydney have almost doubled since January 2009, while Melbourne's have increased by 85 per cent.

Price growth was more mixed elsewhere in December, with Hobart seeing an annual rise of 7.8 per cent and Brisbane 4.4 per cent, but Perth suffering a fall of 3.2 per cent.

Growth outside the major cities was also modest at 2.8 per cent.

There has also been a divergence of growth between houses and apartments, with the latter expanding more slowly. Capital city house values rose an annual 11.1 per cent, compared to 8.0 per cent for units.

The inexorable price rise in the major cities has taken homes out of the reach of most first-time buyers and has become a political hot potato.

The conservative government of Malcolm Turnbull has blamed a lack of supply for the problem, while the opposition Labor Party has pointed the finger at favourable tax treatment for property investment.

REUTERS

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