The most recent (released Feb 1 2011) house price data positive trend for the eight capital cities.
The Australian Bureau Statistics using a clustering approach. The property clustered based on specific attributes. The weights are at the cluster level, according to the importance of the cluster at the city level (ABS).
Chart.1 depicts the house price index of the weighted average of eight capital cities of Australia.
Chart.1 House Prices Returning to Trend?
Chart.2 Is House Price Growth Losing Steam?
Chart.2 shows both the annual and quarter on quarter on growth in house prices. The pace of house price growth has decelerated. The slow down in the rate of growth in house prices has be attributed to RBA raising the cash rate 4 times since December 2009 (3.75%) until November 2010 (4.75%). ; the end of first home owner boost; tighter foreign investment rules and a strong Aussie dollar.
Chart.3 depicts the price performance of house price in different states (re-based to Q1 2002). Surprisingly, the chart show Sydney is lags the other capital cities throughout the time shown on chart. While, Perth, which outperformed other cities from June 2006 until December 2007, is showing signs that house prices have rolled over. Hobart has been the leading performer since mid 2008. Most evident is that the pace of the house price growth has slowed.
Chart.3 8 Capital Cities for Price Performance
In the short-medium term, we can expect house price growth to moderate. The main drivers influencing the medium term outlook will be:
- RBA Monetary policy: specifically the direction of the policy rate
- Economic : especially the terms of trade and economic growth in Asia
- Supply side issues: persistence of sluggish building levels