Govt grants of as much as A$21,000 given to first-time buyers spur demand
(SYDNEY) Australian house prices rose in the three months through September for a second quarter as government grants spurred demand among first-time buyers.
An index measuring the weighted average of prices for established houses in the eight capital cities climbed 4.2 per cent from the second quarter, when it advanced by the same amount, the Australian Bureau of Statistics said in Sydney yesterday. The median estimate of 18 economists surveyed by Bloomberg News was for a 3 per cent gain.
Concern surging house prices may make Australia vulnerable to a US-style sub-prime crisis was among reasons central bank governor Glenn Stevens raised the benchmark lending rate last month by a quarter percentage point from a half-century low of 3 per cent. Analysts surveyed by Bloomberg News predict Mr Stevens will increase the rate by another quarter point today.
Large gains in 'house prices when rates are near record lows don't sit well with a central bank', Bill Evans, chief economist at Westpac Banking Corp in Sydney, said ahead of yesterday's report. 'The pace of price growth will moderate over the immediate short term as demand is checked by rate rises and as first home buyer activity cools,' Evans added.
Prices rose 6.2 per cent from a year earlier, yesterday's report said.
Demand for homes surged this year after the government boosted payments to first-time buyers to as much as A$21,000 (S$25,600) in October 2008. Some 171,347 people have used the grants to enter the nation's housing market for the first time, Housing Minister Tanya Plibersek said last Saturday.
'We've seen the housing industry and the housing market holding up under what would have been very difficult circumstances,' Ms Plibersek said. 'We've seen people losing significant amounts on the value of their home in many other countries.'
Residential property prices across Australia rose 8.1 per cent this year through September, Brisbane-based property monitoring company RP Data-Rismark said last Friday. The median value of Australian houses was A$515,366 last month.
Australia's central bank should raise borrowing costs today to keep a lid on an 'irrational exuberance' in the housing market that is 'arguably now out of line', Mark Joiner, National Australia Bank Ltd's chief financial officer, told the Australian Financial Review in an interview published on Saturday.
The government last year tripled payments to first-time buyers of new dwellings to A$21,000, and doubled the grant to A$14,000 for existing homes. Those payments were reduced last month to A$14,000 and A$10,500 respectively and will revert to A$7,000 for both categories on Jan 1.
Australian regional governments will also introduce price caps next year on the value of homes bought by individuals using federal government grants.
From Jan 1, first-time buyers will be eligible for the payments of A$7,000 only when purchasing dwellings costing less than A$750,000 in New South Wales, Western Australia and the Northern Territory. The caps are set at A$1 million in Queensland and A$600,000 in Victoria.
Mr Stevens and his board will raise the overnight cash rate target today by a quarter percentage point to 3.5 per cent, according to 18 of 22 economists surveyed by Bloomberg News last week. The rest expect a half-point increase. -- Bloomberg
Source: Business Times, 3 Nov 2009
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