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Australia’s Property Values Show Biggest Jump In Four Years

(RTTNews) – National property values in Australia jumped by nearly 2% in August, a report by property information agency RP Data and fund management firm Rismark International said Wednesday. This is the largest rise in values since the RP Data-Rismark Home Value Indices began in January 2005.

According to the report, home values in Australia rose 1.9% in August, bringing the cumulative capital growth in the first eight months to a better-than-expected 7.9%. RP-Data said this is also the highest since the series began in 2005.

Home values have also increased 3.8% from their peak in February last year. This rebound followed the peak-to-trough falls in national home values of just 3.8% in 2008, and compares exceptionally well with the 15% and 30% house price declines seen in the UK and US, respectively, the report noted.

Commenting on the data, Rismark International’s managing director Christopher Joye said, ” Australia’s housing market is being underpinned by the strongest population growth since 1971, record housing shortages, historically low mortgage rates, better than expected employment outcomes, and one of the world’s most profitable banking systems.” He also added that the recovery was not limited to the first home buyer market.

Moreover, the strongest growth in value over the last three months was seen in the premium residential market, with values rising 4.5%. In the middle market, values rose 3.4% and in the lower market, prices were up 2.8%. However, prices in the most expensive markets were still 1.1% lower than their peak.

Joye pointed out that even though the recovery in the housing market confirmed Rismark’s forecasts, he said the medium term growth rate could be more measured as the mortgage rate normalizes back to 7%-8%. This would bring the cost of housing finance back in line with its 2000-01 levels, which is notably well below the searing 9.6% highs endured by borrowers in August 2008 care of the RBA, he noted.

Meanwhile, highlighting the importance of rising house prices for economic development, the report said significant new investment in housing supply would be needed to alleviate the growing shortage of houses.

Tuesday, the central bank’s Head of Economic Analysis Anthony Richards warned that house prices in Australia may rise too fast hurting low income households’ ability to buy homes. He noted that one of the main factors driving house prices was increased affordability, with mortgage rates at particularly low levels. However, the current accommodative climate is unlikely to last for too long, with the central bank expected to hike interest rates soon.

“As the bank has noted on a number of occasions, it is not reasonable to expect that interest rates will stay at the current low levels indefinitely,” he said.

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