House prices up but bargains remain

By Turi Condon, The Australian, 1 September 2009

CAPITAL city housing markets have shrugged off the global financial crisis, with values rising 5.9 per cent in the first seven months of the year, surpassing the last market peak in February last year.

The Australian reported Darwin led the growth with values increasing 10.8 per cent to a median price of $466,903, while Melbourne values rose 8.5 per cent, taking prices to $454,524, and Sydney's housing prices were up 6.6 per cent to $537,396, according to residential researcher RP Data-Rismark's Home Value Index.

Housing prices first edged over the previous peak in June, but by July had breached the previous high by 1.8 per cent, Rismark International managing director, Christopher Joye said yesterday.

The strongest population growth since 1971 -- from both increased immigration and a rising fertility rate -- allied with low interest rates, a resilient jobs market, and a shortage of housing running at a 200,000 undersupply, had underpinned housing values, Mr Joye said.

Australia's housing market had very few distressed sellers, helping to keep a floor under prices, he said.

Mortgage default rates were 0.6 per cent in Australia compared with 5 per cent in the US and 3 per cent in Britain.

"Notwithstanding headwinds associated with the withdrawal of the first-time buyers boost in December, a steepening yield curve that is gradually driving up the cost of fixed-rate loans, and the Reserve Bank's shift to a tightening bias, we believe the housing market will grind out further modest gains over the course of the next 12 months," Mr Joye said.