A leading private index shows house prices have continued their upward march, despite four interest rate increases in the past six months.
The Reserve Bank has, for more than half a year, explicitly expressed its concern about steep increases in home prices.
It has gone as far as hinting that the speed with which it raised interest rates at the end of last year was at least partly due to concerns about the potential for a housing bubble to develop if rates stayed too low too long.
The RP Data – Rismark index, which is watched by the RBA, shows capital city home values increased by 1.4 per cent in February, bringing up gains of 12.7 per cent over the past year.
It also reveals the median national capital city home price (includes houses and apartments) is now $455,000.
RP Data’s research director, Tim Lawless, says he is surprised by how little impact rising interest rates and the removal of government incentives has had on the market so far.
“These are the first two months where we have seen a complete absence of the first home buyers boost, and we’ve also seen four interest rate rises… that haven’t seemed to dampen the market as much as we would’ve expected,” he told ABC News Online.
“I still think going forward for the larger part of 2010 we will see growth rates around Australia moderate, but we certainly haven’t seen any indication of that to date.”
However, Mr Lawless also points out that prices in regional and rural areas have not increased as quickly, climbing by only 7 per cent in the year to February.
House prices changing lifestyles
The index also shows that disposable household incomes have roughly kept pace with increasing home prices over the past five years.
Capital city home prices rose an average of 6.2 per cent per annum over the five years to the end of 2009, while ABS figures show household disposable incomes have increased 6 per cent per annum.
However, Tim Lawless says that is largely because households are working more hours to pay for the increased cost of housing.
“People are, I suppose, combating the affordability situation. We are seeing more people paying the mortgage, so in many cases two incomes per household,” he said.
“We’re also seeing kids staying home a lot longer because it’s very difficult to afford a home as a first home buyer, and it’s also becoming very difficult to rent a home, because there are also rental affordability pressures.”
City by city
The nation’s capital now has the country’s most expensive real estate at a median price of $540,000, while Sydney’s median price was $519,000 (up 3.8 per cent in February).
Hobart had the lowest median home price of $325,000 – it also had the biggest fall in prices during February of 4.2 per cent. Perth was the only other city where prices fell (by 0.2 per cent).
Tim Lawless, says Melbourne continues to have the strongest property market in the country, with prices surging 5.4 per cent in February.
“The results are quite different from city to city. At one of the spectrum, you’ve got a city like Melbourne, where we’ve seen values up nearly 20 per cent [over the past 12 months], at 19.3 per cent,” he said.
“Down the other end of the spectrum we see cities like Perth, Brisbane and Adelaide where value are up much less than 10 per cent over the same timeframe.”