Australian home prices surge in May as sales race past supply

[SYDNEY] Australian home prices surged anew in May as super-low rates and strong demand met a general shortage of supply to drive values higher, particularly in the major cities where markets were booming.

Data from property consultant CoreLogic out on Tuesday showed national home prices climbed 2.2 per cent in May, on top of a 1.8 per cent increase in April. Prices were up 10.6 per cent on last year, and 7.0 per cent in just the three months to May.

Sydney prices soared 3.0 per cent in May bringing gains in the past three months to more than 9 per cent, while Melbourne added 1.8 per cent in May, Brisbane 2.0 per cent and Adelaide 1.9 per cent.

"The combination of improving economic conditions and low interest rates is continuing to support consumer confidence which, in turn has created persistently strong demand for housing," said CoreLogic's research director, Tim Lawless.

"At the same time, advertised supply remains well below average."

The red-hot market has provided a much-needed windfall to consumer wealth and confidence. The Australian Bureau of Statistics estimates the value of homes rose A$258 billion in the December quarter to hit A$7.7 trillion (S$7.87 trillion), and that was before the latest jump.

Buyers have been encouraged by the outlook for borrowing costs, with the Reserve Bank of Australia (RBA) repeatedly saying rates were likely to remain at a historic low of 0.1 per cent until at least 2024.

Concerns about affordability and lending standards could lead to some tightening in macro prudential rules later this year, but so far policy makers have been hands off.

The RBA has argued that historically low population growth caused by border closures and increased supply will eventually work to cool the market.

So far, momentum is strong with Mr Lawless noting home sales were running 37 per cent higher than the five-year average, and faster than new listings.

REUTERS