SYDNEY, July 5 (Reuters) - Australia’s central bank is carefully watching weakness in home prices in Sydney and Melbourne given the impact that could have on household wealth, a top official said on Thursday.
The Reserve Bank of Australia’s (RBA) Head of Economics Analysis, Alex Heath, emphasised that recent economic data had been generally positive and the bank was more confident about the outlook for investment outside the mining sector.
However, she noted housing construction had plateaued, albeit at high levels, and was unlikely to contribute much to economic growth over the next couple of years.
The pipeline of work yet to be done was particularly strong in New South Wales and Victoria, where home prices had softened markedly in recent months. “Housing price growth has been strong until recently in Sydney and Melbourne, where population growth has been strong,” Heath told a conference at the Urban Development Institute of Australia in Wollongong.
“Given that housing accounts for around 55 percent of total household assets, we are paying close attention to these developments.”
Data out this week from property consultant CoreLogic showed home prices in Sydney were down 4.5 percent in June from a year ago, the sharpest decline since the global financial crisis of 2008.
Annual price growth in Melbourne had slowed to just 1.0 percent, from a double-digit pace last year.
After a decade of runaway gains, the country’s housing stock is worth around A$6.9 trillion ($5.09 trillion), according to estimates from the Australian Bureau of Statistics.
Heath added that she expected demand for housing to remain strong overall because population growth was also likely to remain strong.
Australia’s population is growing around 1.6 percent a year, more than twice the average of the developed world, largely due to immigration, notably of people on student visas. (Reporting by Wayne Cole; Editing by Sam Holmes)