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September puts a spring in housing market

Australia's home values rose 1.4 per cent in September, the largest monthly rise in two years, as lower interest rates attracted spring buyers, new figures show.

The jump in values will provide relief to vendors and other industry players who have struggled with falling or stagnant prices for the past two years since the market peaked in 2010.

‘‘The strong performance of the housing market since the beginning of June has reversed the value falls recorded earlier in the year, putting dwelling values 0.8 per cent higher over the first nine months of the year,’’ according to property analysts RP Data.

Analyst Tim Lawless attributed the rebound in values in September to low interest rates being charged by banks on mortgages.

“It’s no coincidence that housing market conditions bottomed out at the end of May, after the Reserve Bank cut the official cash rate by 50 basis points,’’ he said.

‘‘A further cut of 25 basis points in June and the anticipation of further rate cuts in the pipeline appear to have instilled renewed confidence in the housing market.’’

Over the three months to September, capital city dwelling values across Australia rose 2.0 per cent, with rises in all cities apart from Hobart and Perth, RP Data said.

Perth’s values fell 0.2 per cent over the three months, a virtually flat result, while Hobart’s dropped 1.8 per cent. Darwin’s home prices rose the most, up 3.9 per cent.

Sydney recorded a rise of 2.8 over the quarter and Melbourne, which has been hit hardest by falling values, recorded a jump of 3 per cent, according to RP Data. A turnaround in conditions may spur more home hunters to enter the market, with many potential buyers holding off as prices softened over the past two years.

Sellers may also be more confident about putting their home on the market.

But several reports released last week suggest Australia’s residential property market is still vulnerable to global economic conditions and wary, downbeat consumers.

Buyer interest remains soft, sales activity is at historically low levels and the stock of unsold homes at near record highs, the ANZ’s Australian Property Outlook said.

High profile business failures, insolvencies and job cuts have heightened concerns over job security in many areas, prompting households to focus on paying off debt, it suggests.

84 comments

  • Ross Garnaut on lateline spelt out the coming reversal in Australia's economic fortunes:

    China is slowing down due to the confluence of 3 factors producing a perfect storm for demand for resources:

    1) structural change in the economy so that now wages are increasing and labour is becoming scarce

    2) a switch to services and domestic demand so that the standard of living is improved beyond lifting people out of poverty and improvements coming from education, health, enviromental ameninty, and other services. This means a reduction in the growth of demand for energy like thermal coal and also coking coal and steel.

    3) a cyclical downturn. Economic cental planning cannot be finetuned that well, there will be an overshoot to the downside.

    Garnault says that the boom prices meant that Australia enjoyed the salad days of being able to consume more without producing more. The salad days are now over. Australia will have to produce more just to maintain its standard of living but until it can do that its economy will also overshoot on the downside.

    What will that do to house prices?

    Nicely demolished Alan Jones too. Not that that's difficult.

    Commenter
    Allan
    Location
    Prahran
    Date and time
    October 02, 2012, 11:26AM
    • An even better economist, John Maynard Keynes, said "When the facts change, I change my mind". Maybe you should take a leaf out of his book Allan.

      Commenter
      Mallard
      Date and time
      October 02, 2012, 12:08PM
    • I'm wondering what Alan Jones has to do with any of this.

      Commenter
      guy
      Date and time
      October 02, 2012, 1:12PM
    • Yes, and also demolished the claptrap about Howard and Costello being such "great" economic managers. All they created was an unsustainable entitlement mentality which blights the country still.
      If indeed the figures are correct it could also represent the beginnings of the "Bull Trap" in the bubble graph.
      Time will tell...

      Commenter
      Rx
      Date and time
      October 02, 2012, 1:31PM
    • Spot on Allan. The recent increase is due to FHOG and early spring sales hence it is dead cat bounce. Our government keep telling us that our economy strong just like Ben Bernanke told people in states that US economy was strong in 2007.

      Commenter
      The sky is the limit
      Date and time
      October 02, 2012, 2:01PM
    • 1) So Chinese population will become wealthier and could be affording more of the goods they manufacture themselves and some that they don't. All of which would require resources in increasing quantities ...

      2) Increase in demand for services doesn't mean decrease in demand for resources. But increase in demand for services does provide additional opportunity for Australian exports, export of services rather than just raw resources.

      3) Central planning doesn't need to be "finetuned" in order to avoid cyclical downturn. Beauty of it is that conditions could be amended on command

      Commenter
      just_me_again
      Location
      sydney
      Date and time
      October 02, 2012, 2:40PM
    • Return to normal!!
      Yay!!!

      http://steadfastfinances.com/blog/wp-content/uploads/2009/11/Psychology-of-bubbles-plotted-by-investor-psychology-vs-value-Dr.-Rodrigue-Hofstra-university1.gif

      Commenter
      FONZ
      Date and time
      October 02, 2012, 2:46PM
    • @Allan. Saw the interview last night, pity so many discount him. Then again pity those who do discount him, as their assets could be discounted when the can stops being kicked down the road O/S.

      @Mallard.

      You don't fix a drunk with a drink, a junky with a fix and you'll soon see what printing money will achieve. Sure, inflation could take off but where will it end? There are too many who can't afford to buy a home now. Even if inflation drives home prices higher, how high will the FHOG have to go and where will the govt find the $?

      The profound words of Austrian School economist Ludwig von Mises drive right through the soft underbelly of fiat currency-based Keynesianism: “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

      To wit, Europe, Japan & USA continue to printing money, kicking the can down the road to the point where eventually the interest will be what happens when interest rates go back up and the larger debt has to be repaid via higher taxes. Don't worry, the USA will encounter the problem long before us as most of debt problem is public debt. Our govt debt is 9% of GDP, business 31% and household 60%. If Mallard and other property spruikers are right, the household debt (and problem) will be much bigger, especially if Prof Garnaut is right and GDP is lower.

      Commenter
      nolongerconfused
      Location
      Sydney
      Date and time
      October 02, 2012, 4:04PM
    • Alan, do me a favor since you know everything. Pick a house at random, any house. Call the agent and offer 40%less than the asking price. Put your money where your mouth is and please remember to report back to us all how it went for you, if they can say anything through their laughter. In the 6 yrs you've been praying for this magical price crash you could have paid a house off in the hole you live in. Joke. Go on, search for an article that backs up your silly claims and post it to me (like people with brains read them). Investors need/love people like you. Interest rate drop today, rent increase tomorrow. You know why? Coz I can.

      Commenter
      Anne
      Date and time
      October 02, 2012, 5:56PM
  • So one month of data is enough to confirm a recovery?
    Amazing really.

    Commenter
    Rico
    Date and time
    October 02, 2012, 11:27AM

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