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Australia home prices down in March; pace of decline slows

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The weakness in home prices is a major reason financial markets are wagering the central bank will have to cut rates this year, possibly as soon as August.

Sydney

AUSTRALIAN home prices fell again in March as credit conditions remained tight and investors stayed away, although the pace of decline slowed as more auctions found buyers.

Monday's report from property consultant CoreLogic showed home prices nationally fell 0.6 per cent in March, from February when they dropped 0.7 per cent. That was the smallest monthly fall since October. Values were down 6.9 per cent on a year earlier.

The index has fallen in 15 of the past 17 months, wiping out more than two years of gains. Values in the combined capital cities fell 0.7 per cent in March, after a 0.9 per cent drop the previous month.

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The slower pace of decline came as auction clearance rates have picked up over the last month or so, particularly in the hardest-hit markets of Sydney and Melbourne.

Prices fell 0.9 per cent in Sydney in March, and 0.8 per cent in Melbourne. Values nationally have fallen 7.4 per cent from their peak in October 2017, although they are still almost 16 per cent higher than five years ago.

Any improvement would be welcomed by the central bank, the Reserve Bank of Australia (RBA), which is concerned that a further substantial fall in prices would undermine household wealth and spending.

Australia's housing stock is valued at A$6.8 trillion (S$6.56 trillion), or almost four times the country's annual gross domestic product.

Falling house prices are also a headache for the Liberal National government of Prime Minister Scott Morrison, which faces an election in May and is trailing badly in opinion polls.

The conservative government announces its annual budget on Tuesday and is likely to unveil a package of tax cuts and spending plans to win over voters.

The RBA also holds its March policy meeting on Tuesday and is considered almost certain to keep rates at 1.5 per cent, where they have been since mid-2016.

The weakness in home prices is a major reason financial markets are wagering the central bank will have to cut rates this year, possibly as soon as August.

Part of the drag on housing has come from banks which, scalded by a spate of scandals, have toughened their lending criteria and raised mortgage rates on many products, particularly for investors. REUTERS