SYDNEY, April 3 Home prices in Australia's major
cities jumped again in March to propel annual growth to the
fastest in almost seven years, a challenge to policy makers
alarmed at the risks of a debt-fuelled bubble in the housing
Property consultant CoreLogic said its index of home prices
for the combined capital cities climbed 1.4 percent in March,
matching the previous month's gain.
Annual growth in overall prices accelerated to 12.9 percent,
from 11.7 percent, surpassing the previous peak touched in 2015
and the fastest pace since May 2010.
That will be a worry for the Reserve Bank of Australia (RBA)
which is concerned that debt-fuelled speculation in property
could ultimately hurt both consumers and banks.
Just last week the country's main bank watchdog tightened
standards on investment and interest-only loans to try and cool
the market. Banks themselves have been raising mortgage rates
and blaming the costs of regulation.
After cutting interest rates to a record low of 1.5 percent
last August, the RBA has warned further easing would only
encourage more borrowing by already heavily indebted households.
"We can expect lending conditions for investment purposes
will tighten, particularly for investors with small deposits or
those applying for an interest only loan," said CoreLogic head
of research Tim Lawless.
"Higher mortgage rates handed down by Australia's major
banks may contribute towards cooling some of the exuberance
being seen in the largest capital city housing markets."
The CoreLogic data showed home prices in Sydney kept up
their blistering run with a rise of 1.4 percent in March. The
annual pace of growth spurted to 18.9 percent.
Melbourne saw a surge of 1.9 percent in the month, lifting
annual growth to 15.9 percent. Hobart and Canberra also saw
double-digit growth for the year, while Perth and Darwin
suffered falls in prices.
Lawless noted the rush into investment properties and
expanding supply of apartments has driven yields to record lows
in Sydney and Melbourne.
The slowdown in yields has in turn been a major drag on
consumer price inflation, which hit record lows late last year.
Since January 2009, home values in Sydney have more than
doubled while Melbourne has increased by over 90 percent.
The inexorable price rise in the major cities has taken
homes out of the reach of many first-time buyers and 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
(Reporting by Wayne Cole; Editing by Richard Pullin)