Australian house prices enjoy surprise rise in Q2

House prices in Australia’s major cities recorded a surprise increase last quarter, the first in more than a year and perhaps an early sign that recent cuts in interest rates are stabilising demand in what has been a very subdued market.

Wednesday’s figures from the government showed prices for established houses in the major cities rose 0.5 per cent in the second quarter. The first quarter was also revised to show a slight 0.1 per cent dip, compared to an initial 1.1 per cent drop.

Prices were still down 2.1 per cent on the same quarter last year, but that was the slowest pace of decline in more than a year. The index of house prices was also just 4.7 per cent below the all-time peak hit in 2010, a far smaller drop than suffered in the United States or Britain.

The sector was likely aided by the Reserve Bank of Australia (RBA), which cut its main cash rate by a total 75 basis points over May and June to take it to 3.5 per cent, the lowest since December 2009.

That brought the total easing since November 2011 to 125 basis points and left mortgage rates about half a point below their long-run average.

Australian households are highly sensitive to mortgage rates as 35 per cent have home loans, most of which are variable.

Source : Today – 1 Aug 2012

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