Rate cut 'won't stop house price fall'
House prices continued to fall in early 2012, and economists say an expected interest rate cut is unlikely to be enough to revive the struggling sector.
Data released by the Australian Bureau of Statistics on Wednesday showed Australian capital city house prices fell 1.1 per cent in the three months to March 31, more than economists' expectations of an 0.5 per cent fall.
In the year to March, the house price index fell 4.5 per cent, the ABS said.
The figures echoed the results of a private sector survey released by RP Data on Tuesday morning, which showed capital city dwelling prices fell 0.8 per cent in April.
The Reserve Bank of Australia is expected to cut the cash rate from its current level of 4.25 per cent at its May board meeting on Tuesday afternoon.
However, National Australia Bank chief economist Rob Henderson said the data showed successive interest rate cuts in November and December had done little to support house prices.
"Three months after two interest rate cuts, what has happened to house prices? They have fallen," he said.
"So it doesn't suggest interest rate cuts are much of a panacea for the housing market does it?"
CMC chief market strategist Michael McCarthy said the data showed continuing weak sentiment among consumers.
"It's a disappointing result, given the rate cuts we saw in November and December," he said.
"It indicates that even though we've seen a pick-up in activity, it's not flowing through to any exuberance or over-confidence with regard to prices.
"Overall, it's not a great concern economically, but in its potential to further dampen consumer sentiment, it is a red flag.
"As much as anything, it reflects the negative sentiment of the previous quarter, rather than developments over this quarter."
JP Morgan economist Ben Jarman said the major mining states of Western Australia and Queensland enjoyed strength in house prices.
"Perth, in particular, continues to be pretty strong," he said.
"If you take a longer-term view of Perth, it did around five or six years ago have a very large run-up in prices and, so, there was a sense that it should have grown slower than the rest so everyone could catch up.
"The fact that they are starting to post some solid numbers again is a pretty solid result, it's pretty consistent with the mining exposures there."
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