View of exclusive homes along Sydney Harbour.
Home prices in Australia rose for a 10th consecutive month in October, on the back of record-low borrowing costs which kept demand strong in Sydney and Melbourne, reported Reuters.
With this, markets do not expect the Reserve Bank of Australia (RBA) to ease official rates following cuts in May and August.
A survey of 60 economists revealed that all except five expect rates to remain at 1.5 percent, partly because policymakers have raised concerns of an overheating housing market.
Data from property consultancy CoreLogic shows that home prices for the combined capital cities inched up by another 0.5 percent last month, compared to September when it rose one percent.
Annual price growth accelerated from 7.1 percent in September to 7.5 percent in October, although it remained way below last year’s peak at 11 percent.
Melbourne and Sydney remained the hotspots with annual price growth at 9.1 percent and 10.6 percent, respectively. Elsewhere, growth was more modest, with prices even falling in Darwin and Perth.
The price hike in major cities has kept homes out of the reach of most first-time buyers, and sparked concerns of excessive borrowing by property investors.
“With ongoing strong value growth and high clearance rates in Sydney and Melbourne, as well debate around affordability gathering some momentum, there is likely to be further caution by the Reserve Bank around future rate cuts,” said Tim Lawless, Research Director at CoreLogic.
Tracking at around the upper 70 percent levels, clearance rates at auctions were considered one measure of the strength of demand.
In Sydney alone, weekly clearance levels dropped below 80 percent only once in September and October, noted Lawless.
Price growth for houses consistently surpassed that of apartments, possibly due to the huge supply of new units set to enter the market over the next year or two.
Lawless revealed that this was especially true for Brisbane, where building approvals indicated that the existing stock could increase by more than a quarter in the next two years.
The corresponding increases for Melbourne and Sydney were 16 percent and 13 percent, respectively.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
