Low interest rates boost Aust house prices

5 Feb 2013, 6:41 pm   -   Source: AAP
Australian capital city house prices rose 1.6 per cent in the December quarter, ABS data shows. (AAP)

Australian capital city house prices rose 1.6 per cent in the December quarter, ABS data shows. (AAP)

The Australian Bureau of Statistics says capital city house prices rose 1.6 per cent in the December quarter after a fall in the previous three months.

House prices ended 2012 on a high, thanks to lower interest rates improving affordability and more confident homebuyers.

Official data released on Tuesday showed house prices in Australia's capital cities rose 1.6 per cent in the December quarter.

This compares with a 0.1 per cent fall in the September quarter.

In the year to December, the house price index rose 2.1 per cent, the Australian Bureau of Statistics (ABS) figures showed.

UBS economist George Tharenou said the rise was much stronger than expected and supported the broad trend that property values were picking up.

"I think the RBA's (Reserve Bank of Australia) interest rate cuts have made a material difference to housing affordability, which has improved to the best in around a decade," he said.

"That has stimulated people to go out and pay more for homes."

The RBA cut the cash rate by 1.75 percentage points between November 2011 and December 2012 and kept the rate steady at 3 per cent on Tuesday after its first monthly board meeting for the calendar year.

Mr Tharenou said the data suggested household wealth was improving, with a little help from a more stable global economy and a rebound in equity markets.

He predicted house prices would continue to drift up during 2013 but didn't expect them to reach the double-digit growth seen during 2009 and 2010.

Perth and Darwin were the country's best performing cities, recording price increases of 2.9 per cent and 2.6 per cent, respectively, over the quarter.

Sydney posted a solid 2.3 per cent jump in home values over the quarter, followed by Canberra with a 2.1 per cent gain.

House prices in both Melbourne and Brisbane edged slightly higher, by 0.7 per cent.

Adelaide values rose 0.8 per cent for the quarter but fell 0.4% for the year.

Hobart was the only capital city to have lost ground in the final quarter of 2012, with prices falling 1.4 per cent, and 6.1 per cent in the year to December.

St George chief economist Hans Kunnen said the solid rise suggested there was an increasing demand for homes as consumers were getting a bit more confidence in the economy.

But, he said, he expected it to have little influence on the possibility of further interest rates cuts.

"I don't think it has a lot of implications for interest rates other than to suggest to the RBA that, despite evidence to the contrary, (cuts) in interest rates still do work," he said.

The ABS data follows last week's RP Data-Rismark Home Value Index for January, which showed dwelling values rose 1.2 per cent, on aggregate, across the country's eight capital cities.

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