Australia house prices fall in Q2

August 5, 2008
Australia house prices fall in Q2

(SYDNEY) Australian house prices fell in the second quarter for the
first time in almost three years as the highest borrowing costs since
1996 deterred home buyers.

An index measuring the weighted average of prices for established
houses in the nation's eight capital cities fell 0.3 per cent from
the March quarter, when it rose a revised 0.4 per cent, the
Australian Bureau of Statistics said in Sydney yesterday. The median
estimate of 18 economists surveyed by Bloomberg News was for a 1.3
per cent drop.

Falling house prices support central bank governor Glenn Stevens'
view that Australia's US$1 trillion economy will slow enough to cool
inflation that has accelerated above his target range of 2 per cent
to 3 per cent. Mr Stevens raised the benchmark borrowing cost to 7.25
per cent in March, the fourth increase since August last year.

'Property markets are losing steam and price growth is moderating in
the face of high interest rates,' said Hayden Atkins, an economist at
Macquarie Group Ltd in Sydney. 'But the rate of decline doesn't
appear to be particularly alarming and is in stark contrast' to the
US and the UK, he added.

Second-quarter house prices rose 8.2 per cent from a year earlier,
the smallest gain in two years, after climbing a revised 13.2 per
cent in the first quarter, yesterday's report showed. Economists
forecast an 8 per cent increase.

The nation's five largest lenders, including Commonwealth Bank of
Australia Ltd, have added an average 105 basis points to mortgage
rates in 2008 as the global credit squeeze drove up funding costs.
The central bank has added a total of 50 basis points this year.

The increases have added A$250 (S$320) to monthly payments on an
average A$250,000 home loan, according to the Real Estate Institute.
Households spent 38 per cent of their incomes on mortgage payments in
the March quarter, the most in the 22 years the institute has
measured affordability.

Second-quarter house prices dropped the most in Perth, declining 2.4
per cent from the previous quarter, followed by 2 per cent in Hobart,
1.4 per cent in Canberra and 0.3 per cent in Melbourne. Sydney gained
0.3 per cent, Adelaide 0.4 per cent, Brisbane 0.6 per cent and Darwin
gained 1.9 per cent.