House prices lift as buyers return: 2pc rise in August

By Turi Condon and Bridget Carter, The Australian, 1 October 2009

HOUSING prices around the country rose nearly 2 per cent in August, the biggest monthly increase since researcher RP Data-Rismark began its tracking in 2005.

The August increase takes housing value growth to 7.9 per cent for the first eight months of the year, with Melbourne turning in the best performance -- an 11.6 per cent jump.

The strong result was due to solid confidence from buyers and the low numbers of homes for sale, RP Data research director Tim Lawless said.

"These buoyant conditions sit in striking contrast to the same time last year, when values were falling," Mr Lawless said. "Less than half of the auctions cleared and sales volumes were at rock bottom."

Auction clearance rates had rebounded to nearly 80 per cent, and sales volumes had risen, Mr Lawless noted.

Australian housing values had increased 3.8 per cent above those of February last year -- the peak of the market, the researcher said.

Australian house prices have fallen far less than in Britain and the US. Australia's residential values dropped 3.8 per cent from peak to trough last year, while British prices fell 15 per cent and the US was down 30 per cent, the analyst said.

Rismark International managing director Christopher Joye said housing values were being supported by the strongest population growth since 1971, record housing shortages, historically low home loan rates, better than expected employment figures and the solid banking system.

Meanwhile, residential building approvals were flat in August after surging 19 per cent in June and July.

The result was on the back of a 12 per cent fall in the other dwellings category, which covers large apartment projects, while house building approvals rose 3.1 per cent, underpinned by the first-home owner grant.

New construction will be hampered by financing constraints, according to investment bank JPMorgan's chief economist, Stephen Walters.

In a note yesterday, Mr Walters said an expected 25 basis-point interest rate rise next week, tighter lending standards, the Commonwealth Bank's move this week to lift its fixed mortgage rate, and the winding down of the first-home owner grant would all affect new development.