Australian property prices are still rising, by 15.3 percent over the last year, but by a modest 2.5 percent in the June quarter according to Australian Property Monitors.
House price growth slowed in the June quarter to 2.5 percent nationally, after increasing by 3.1 percent in the March 2010 quarter. This shift down in growtyh suggests that while the Reserve Bank of Australia six rate rises in the last nine months haven’t caused the market to collapse, they are causing it to soften slowly in a controlled fashion.
APM economist Matthew Bell was expecting house prices to cool in the June quarter after successive rate increases from the RBA and is surprised at the result. Predominantly unit prices at the lower end of the market performed best in Sydney, increasing by some 4.3 percent in Liverpool and 3.2 percent in the Sutherland Shire of Sydney. This contrasts to house prices across the Sydney region as a whole which rose 2.4 percent and unit prices at 2.8 percent.
This flight from more affluent suburbs to cheaper, more affordable fringe suburbs is symptomatic of higher interest rates from the Reserve Bank of Australia hitting prospective home buyers and forcing changes in buyer behaviour, in particular shifting down expectations and forcing Australians to buy relatively less expensive property further out from the Sydney CBD. So while prices as a whole have still been bid up 2.5 percent on average, most of that activity is occuring at the bottom end of the market as the real cost (the cost of buying a property, plus the full cost of servicing the loan over its lifetime) increases.
Sydney fared well from a buyers perspective, by contrast prices in Melbourne increased by 4.4 percent for houses and 3.8 percent for units.
