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Rate increases will test buyers’ enthusiasm

Post Date:03/02/2010 | Author: Admin
The Australian Financial Review 29/10/09
Australian house prices had their strongest quarterly growth since 2003, driven by a strong recovery in high-end residential values, according to Australian Property Monitors.
But the buoyant growth would be tempered in 2010 as the Reserve Bank of Australia pushes up interest rates, according to APM and other industry experts. Most impressive of all in the September quarter was the executive property market. Having suffered most in the downturn, prices in the top 30 per cent of suburbs rebounded a strong 6.1 per cent in the quarter.
Sydney, which is the country’s largest housing market, saw half of its most expensive suburbs grow by nearly triple the rate experienced in the least expensive areas.
“In addition, sellers who sold properties into the booming first-home owner market over the past year have used sale proceeds to upgrade to more expensive homes and units, placing even more pressure on upper end markets.”
Mr Bell said price growth had slowed in the first-home buyer sector and it was expected to remain well below the rest of the market until next year.
Macquarie Capital Advisors’ Rod Cornish said the boost in high-end residential prices was linked with business conditions, particularly in the finance sector.
“It’s picked up because confidence has picked up. We’re seeing people come back into the upper end as well, particularly after significant price falls,” he said.
But whether Australia’s house price growth can be sustained depends on how quickly mortgage rates rise over the next six months, said APM, a subsidiary of Fairfax Media, publisher of The Australian Financial Review.
But the rises in house prices over the June and September quarter this year needed to be seen in context, he said.
“The market is in recovery, rather than rude health. This argument applies most to Sydney, which suffered declines over the course of 2008. In that context, this evidence doesn’t add to the argument for higher interest rates. Housing markets are not experiencing excessively strong growth,” he said.
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