Home prices in Australia exceeded estimates during the three months through March, increasing the central bank’s likelihood to boost borrowing costs today.
According to the Australian Bureau of Statistics, an index gauging the weighted average of prices for established houses in the eight capital cities soared 4.8 percent from the previous three months. The average estimate of 18 economists polled was for a three-percent gain.
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Home prices climbed 20 percent during the 12 months to March 31, a key reason that spurred 18 out of the 24 economists polled to forecast central bank governor Glenn Stevens to increase the present benchmark lending rate by a quarter percentage point to 4.5 percent, the sixth increase in seven meetings.
Based on recent reports, a gauge of annual inflation accelerated in April to near the top of the central bank’s target range, and growth of manufacturing accelerated in April to the fastest pace in almost eight years.
The Reserve Bank of Australia aims to keep inflation between two percent and three percent on average.
“While this pace of growth may ease in the future, strong auction clearance rates and resilient demand from potential home buyers amid relatively weak supply is likely to push prices’ higher,” said Mr. Paul Brennan, an economist at Citigroup Inc in Sydney.
With a 6.7-percent gain, Melbourne had the most price increases, followed by Canberra with a 5.4-percent advance and Sydney with a 5.3-percent increase, the report showed.
Demand for homes surged last year after the government doubled the grant to A$14,000 for existing homes, and tripled payments to A$21,000 (S$26,600) for first-time buyers of new dwellings in late 2008.
Those payments were reduced to their original A$7,000 on January 1.
Last month, the government also initiated to tighten the rules on foreign investment in properties and introduced penalties to implement the changes that will ensure that no pressure is placed on housing availability for citizens.
For temporary residents to purchase property, they will have to obtain approval from the Foreign Investment Review Board, and will have to sell when leaving the country, said Assistant Treasurer Nick Sherry.
It ensures “working families are not being priced out of their own family homes,” said Prime Minister Kevin Rudd.
As the central bank extends its world-leading series of interest rate moves, growth in housing prices may slow in the coming months.