SYDNEY, Nov 1 (Reuters) - Australian home prices boasted their biggest monthly increase since mid-2015 in October as record-low interest rates and looser lending standards stoked demand in the hard-hit sector.
That was the fourth straight month of gains and a boon for the economy after a two-year downturn chipped away at household wealth and confidence, undermining consumption and business earnings.
It was also the clearest sign yet that the Reserve Bank of Australia’s (RBA) easing campaign was gaining traction, having cut rates three times to just 0.75%.
The central bank holds its November policy meeting next week and is widely expected to stand pat as it gauges the full impact of the easing.
Friday’s data from property consultant CoreLogic showed home prices across the nation rose 1.2% in October, from the previous month, the sharpest rise since May 2015.
Prices across the capital cities rose 1.4% in the month, led by a 2.3% surge in Melbourne - the best performance since 2009 - and a 1.7% jump in Sydney. For the three months to end October, values climbed 5.5% in Melbourne and 5.0% in Sydney.
Values in Sydney were still down 2.5% on a year ago and Melbourne 1.0%, but that was a world away from the double-digit pace of decline suffered earlier this year.
“It’s becoming increasingly clear that the housing market rebound is gathering pace, both geographically and across the broad valuation cohorts, off the back of lower mortgage rates and improved access to credit,” said CoreLogic research director Tim Lawless.
That would be a windfall for consumer wealth and spending power given the housing stock in Australia is valued at a cool A$6.6 trillion ($4.55 trillion), or more than three times the country’s annual economic output (GDP).
A sustained rebound in prices could also prove a saviour for the construction sector which has seen a severe downturn in new home approvals, particularly for the once red-hot apartment sector.
The pick up came amid strong demand at auctions, a popular method of sale in Australia’s major cities, which hit their highest of the year last weekend.
More than 75% of the properties in Sydney that went to auction over the weekend were sold, highs typically associated with past price bubbles.
$1 = 1.4514 Australian dollars Reporting by Wayne Cole Editing by Shri Navaratnam