Subdued End to 2010 for House Prices

The ABS index of established house prices grew at a subdued rate in the December quarter 2010 said the Housing Industry Association (HIA), the voice of Australia’s residential building industry.
HIA’s Senior Economist, Andrew Harvey, said that established house prices grew by 0.7 per cent in the December quarter 2010 to be up by a relatively modest 5.8 per cent since the December quarter 2009.
“The rate of house price growth is fairly subdued, which is what we have expected given tighter monetary policy, less fiscal stimulus directed at housing, and the occasional dooms-sayer prediction that Australian house prices are about to tumble,” said Andrew Harvey.
“HIA Economics is still of the view that house prices will be on a relatively flat trajectory in 2011 due to interest rate expectations and the overall conditions relating to investment in housing. However, in the longer term Australia’s housing market is underpinned by strong fundamentals including healthy underlying demand,” Andrew Harvey noted.
In terms of the jurisdictions, in the December quarter 2010 the established house price index increased by 1.6 per cent in Sydney, 1.3 per cent in Melbourne, 0.7 per cent in Brisbane, 1.1 per cent in Adelaide, 1.1 per cent in Hobart, and 1.9 per cent in Canberra. The house price index was flat in Darwin while Perth was the only jurisdiction in which prices fell, with the index down by 3.2 per cent.
The weighted average index for project homes across Australia’s eight capital cities increased by 0.8 per cent in the December quarter 2010 to be up by a modest 2.8 per cent compared to the December quarter 2009. This is in line with headline inflation which was up by 2.7 per cent over the same period.
The capital city project house price index increased in the December quarter 2010 by 1.2 per cent in Sydney, 0.7 per cent in Melbourne, 0.9 per cent in Brisbane, 0.2 per cent in Adelaide, 0.3 per cent in Perth, and 1.6 per cent in Darwin. The project house price index was flat in the December quarter 2010 in Hobart and Canberra.
“If we wish to ensure that Australia’s population is properly housed, and we want to limit affordability problems that stem from under-building, then as a nation we need a keen focus on lifting new home construction to an extent that removes unnecessary upward pressure on home prices over the longer term,” added Andrew Harvey.
For further information:
Andrew Harvey, Senior Economist 0408 081 977
Harley Dale, Chief Economist 0414 994 186