Australia home prices jump the most in five years in second quarter, Sydney surges

Home prices in Australia posted their biggest quarterly gain in over five years in April to June, led again by Sydney which logged its biggest rise on record. But data from the Australian Bureau of Statistics (ABS) on Tuesday also highlighted the patchy nature of the country's housing market, with cities in resource-rich states such as Western Australia suffering declines as the mining boom fades.
Residential property prices in the country's eight capital cities rose 4.7 percent on the quarter, the biggest increase since the December quarter of 2009. That helped speed up year-on-year gains to 9.8 percent, from 6.9 percent in the first quarter this year. Sydney home prices jumped 8.9 percent in the quarter, taking gains there to 18.9 percent from a year earlier, the fastest since records began in late 2003 and blowing all other states away. See for details. The mean home price in New South Wales state, of which Sydney is the capital, remained the highest across the country at A$777,400 ($554,600).
"Although a little dated, the latest ABS release on residential property prices index for the June quarter confirm what we already knew: strong price growth in Sydney and to a lesser degree in Melbourne have ensured continued solid growth in Australia's house prices," said John Peters, senior economist at Commonwealth Bank. More timely monthly reports produced by property information and analytics firm CoreLogic RP Data, showed growth in home prices in hot spots such as Sydney and Melbourne started to come off the boil in August. Recent auction clearance rates also suggested a slowdown as regulatory measures introduced in July to tighten mortgage lending to investors looked to be taking effect.
"A key question will be how effectively the measures introduced by the Australian Prudential Regulation Authority will impact housing activity and thus prices," Commonwealth Bank's Peters added. Last Friday, Reserve Bank of Australia Governor Glenn Stevens said those measures appeared to be working. "Cognisant of the risk that very low interest rates may foster a worrying debt build-up, regulatory initiatives are in place to maintain sound lending standards and capital adequacy," he told parliament in his twice-year testimony. "I hasten to add that the objective of such tools is not to control dwelling prices, but to contain leverage. The evidence is emerging that they are doing their job."