Australian property prices skyrocket

Sydney real-estate agent Poh Ling Ee remembers the young couple who came to her hoping she could help them buy their first home for a reasonable price.

But with a buying frenzy making Australian homes among the world’s least affordable, Ms Poh said her advice was to take the next home they liked and not quibble too much about the cost.

“You just pay whatever you have to pay to get it before auction,” she said.

In Australia’s largest cities of Sydney and Melbourne, the growth in property prices has been enough to ensure many prospective home owners are priced out of the market before they make their first tentative bid.

A house which cost A$700,000 ($845,600) a year ago now sells for A$800,000 as housing supply fails to keep up with the demands of an increasing population, Ms Poh said.

“Also, there’s been a lot of foreign buyers,” she says, citing the case of a Chinese man who paid A$750,000 cash for a two-bedroom home. “They outbid everyone.”

Australia boasts some of the least affordable housing in the world, according to the United States-based Demographia survey, which found houses in Sydney, Melbourne and Adelaide are less affordable than in London and New York.

Australia’s central bank, which has lifted interest rates six times since October, is keeping its eye on the market.

“Over the past 15 months, capital city housing prices have risen by an average of around 1.0 per cent a month, to be 15 per cent above their trough in late 2008,” the Reserve Bank of Australia said on Friday.

The bank noted that the supply of new housing is not keeping up with demand, while the rise also reflected improved economic growth.

Analysts expect the situation to worsen in Sydney, Australia’s largest city.

The Australian Bureau of Statistics said last week that homes in Sydney have risen 21 per cent over the year to March, and those in Melbourne rocketed 28 per cent.

Perhaps the best sign of the frenzied buying is the sale of a four-bedroom terrace house in Sydney’s trendy Annandale, which fetched A$1.3 million in December 2008 but auctioned for more than A$1.8 million last month.

Source : Today – 10 May 2010

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