Australian house prices have risen for the 10th straight quarter led by another outsized gain in Sydney, adding to concerns about an overheating market and diminishing affordability in the city. Tuesday's data from the Australian Bureau of Statistics showed prices across all the major cities rose 1.6 percent in the three months to March, lifting annual growth to 6.9 percent.
The heat was again very much concentrated in Sydney where prices were up over 13 percent on the year, and that was before the Reserve Bank of Australia (RBA) cut interest rates to a new low of 2 percent in May. More timely data from the housing industry had hinted at a cooling down over the last month or so, partly due to the onset of winter. Yet the latest survey from property consultant CoreLogic RP Data found a sudden rebound last week.
Average values across the state capitals rose 1 percent, from the previous week, with Sydney alone up 1.6 percent and Melbourne 1.4 percent. Annual growth in prices picked up to 9.l percent nationally and a frothy 15 percent in Sydney. Demand was also strong with almost 84 percent of home auctions in Sydney proving successful, and 79 percent in Melbourne.
Some increase in prices was always necessary to drive a much-needed revival in home building. And it's working with approvals to build new homes at a record high, providing jobs and supporting economic growth. But speculative demand has grown so fierce in Sydney it prompted RBA governor Glenn Stevens to label it "crazy". The central bank fears it could ultimately push prices to peaks that threaten a vicious pullback. "It puts the RBA between a rock and a hard place on rates," said Diana Mousina, an economist at Commonwealth Bank.
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