Housing revival may boost economy as mining boom tapers off

Falling interest rates have given the property market a boost, as long boom in mining cools

PUBLISHED : Wednesday, 04 September, 2013, 12:00am
UPDATED : Wednesday, 04 September, 2013, 3:24am

Home prices in Australia's major cities rose for a third straight month in August, while the pace of appreciation moderated, a sign lower mortgage rates are boosting the market without making things too frothy.

Figures out on Monday from property consultant RP Data-Rismark showed home prices rose 0.5 per cent in August from July, when they jumped by 1.6 per cent. Prices were up 5.3 per cent on August last year with a median value of A$490,000 (HK$3.4 million).

RP Data's director of research, Tim Lawless, said the more modest rise in prices in August should help counter any concerns about a bubble forming in home prices.

He noted that the average annual capital gain over the past decade has been just 4.3 per cent across Australia's combined capital cities.

The Reserve Bank of Australia (RBA) has been counting on low rates to help revive the housing market, and particularly homebuilding, and so support the economy as a long boom in mining cools. The central bank cut rates to a record low of 2.5 per cent last month.

The biggest price increase for August of 1.5 per cent came in Brisbane, a turnaround for a city which has lagged since the global financial crisis.

"The strong result for August was evident across both the detached housing and the unit markets and may potentially mark a positive turning point for Brisbane's housing market," said Lawless.

Home prices in Sydney firmed 0.6 per cent in August, while Melbourne saw a rise of 0.2 per cent and Perth recorded a dip of 0.2 per cent. Perth still boasted the fastest growth of 9.4 per cent, followed by Sydney at 7 per cent. Sydney was again the most expensive Australian city with a median home price of A$587,000, followed by Melbourne at A$507,000 and Canberra at A$503,500.