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 of the Reserve Bank’s rates decision today.
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. In the year to September, analysts forecast a 0.8 per cent rise.
The housing market has sent mixed signals in recent months, with auction clearance rates in Sydney and Melbourne rising, but demand for home loans remains at a 35 year low and new home sales have fallen.
Meanwhile, capital city homes prices fell 1 per cent in October, following a 1.4 per cent increase in September, according to RP Data. In October, home prices fell 0.9 per cent in Sydney and 1.1 per cent in Brisbane.
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 sorts of things, so the September quarter data will reflect decisions made mid-year, when latest round of rate cuts began,” he said.
“Then we can expect that improvement in affordability to flow through more clearly.
But he warned that the property outlook was unclear.
“It’s still a very uncertain environment. You still have a range of fears out there about, for example, job security, and global issues are still in the background,” he said.
“Sentiment is still pretty fragile overall. And as we have seen, things can change pretty quickly.”
Macquarie economist Brian Redican said weaker housing growth showed that rate cuts were not having as much of an impact as in the past.
“The Reserve Bank cutting interest rates has removed some of the downward pressure from the housing market,” he said.
“But without investors coming back and looking to re-gear, and indeed with banks reluctant to lend, I don’t think you’re going to get the very strong increases you’d typically have when the Reserve Bank cuts interest rates significantly.”