Bloomberg News

Australian House Prices Fall as Higher Rates Weaken Demand

August 01, 2011

(Updates with comment from economist in fourth paragraph.)

Aug. 2 (Bloomberg) -- Australian house prices declined in the three months through June, the third quarterly drop in the past year, as higher borrowing costs curbed demand.

An index measuring the weighted average of prices for established houses in eight major cities fell 0.1 percent last quarter from the previous three months, when they dropped a revised 1.1 percent, the Australian Bureau of Statistics said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg News was a 1 percent fall. The index declined 1.9 percent from a year earlier.

Reserve Bank of Australia Governor Glenn Stevens will keep the developed world’s highest interest rates unchanged at 4.75 percent today, according to most economists surveyed by Bloomberg News, after the labor market lost 5,400 jobs in the April-June period, the weakest quarter since 2001. Sales of newly built dwellings fell 8.7 percent in June, the biggest decline in five years, a private report showed yesterday.

The result follows “some moderation in auction clearance rates and a reduction in the demand for established dwelling finance,” Joshua Williamson, a senior economist in Sydney at Citigroup Inc., wrote in a report before today’s release.

Prices fell 1 percent in Perth and dropped 1.6 percent in Darwin from the previous quarter, while they advanced 0.4 percent in Sydney and gained 1.1 percent in Canberra. In Melbourne, prices slipped 0.1 percent, the report showed.

A jump in home prices was among reasons Stevens increased the benchmark rate by 175 basis points from October 2009 to November last year.

--With assistance from Daniel Petrie in Sydney. Editors: Brendan Murray, Malcolm Scott

To contact the reporters for this story: Michael Heath in Sydney at mheath1@bloomberg.net;

To contact the editor responsible for this story: Stephanie Phang in Singapore at sphang@bloomberg.net


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