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Home values flat despite auction clearance rise

HOUSE prices inched higher last quarter and annual growth was barely positive, a sign past rate cuts are having only a tepid impact and an open door to more easing ahead even as the Reserve Bank's kept rates on hold on Tuesday.

The Australian house price index rose by just 0.3 per cent in the third quarter, following a 0.5 per cent rise in the second quarter, according to the Australian Bureau of Statistics. Over the year to September, they grew 0.3 per cent following a 2.1 per cent drop.

Economists polled by Bloomberg expected a 1 per cent rise in the quarter, amid firmer auction clearance rates and lower interest rates. For the year to September, analysts forecast a 0.8 per cent rise.

The housing market has sent mixed signals in recent months. Auction clearance rates in Sydney and Melbourne have risen, but demand for home loans remains at a 35-year low and new home sales have fallen.

Commonwealth Bank chief economist Michael Blythe said the market was starting to reflect rate cuts from the middle of the year, but that things were still very patchy.

''There are lags in these things, so the September-quarter data will reflect decisions made midyear, when the latest round of rate cuts began,'' he said. He warned that the outlook for property was unclear.