Upgraders and Investors Make Their Move

Double-digit increases in property prices over 2009 suggests that further interest rate rises may come sooner rather than later, an economist says.

Australian property prices have risen by 11.3 per cent over the first 11 months of 2009, according to the RP Data-Rismark national home value index.

RP Data research director Tim Lawless described 2009 as an "exceptional and surprising year for Australia's property market".

CommSec chief economist Craig James said the data showed home prices were rising at "unsustainable rates" in capital cities such as Darwin (up 17.9 per cent), Melbourne (up 17 per cent) and Hobart, where prices rose 14.2 per cent in the 11 months to November.

While it would take until the new year to get a clearer read on house prices, Mr James said these sorts of increases would "no doubt make the Reserve Bank a little nervous".

"It's fair to say that yet another solid increase in home prices has increased the chances of a rate hike in February," Mr James said in a research note.

"The last thing anyone wants to see in 2010 is another boom-bust scenario being played out in the housing market."

The Reserve Bank of Australia (RBA) has lifted the cash rate at its past three board meetings to its current level of 3.75 per cent.

The RBA's next meeting is on Tuesday, February 2, 2010.

It traditionally does not meet in January.

Among the other capital cities, home prices in Canberra rose 10.9 per cent in the 11 months to November, while they were up 11.6 per cent in Sydney, 6.9 per cent in Brisbane, 6.5 per cent in Perth and 5.7 per cent in Adelaide.

Rismark International managing director Christopher Joye said the increase in house prices over this year defied predictions of substantial falls for 2009.

Mr Joye said the withdrawal of the temporary boost to the first home owner grant in October this year had yet to have any discernable impact on price growth.

"The key driver of Australian housing demand in the latter half of the year appears to have been upgraders and investors," Mr Joye said in a statement.

"We expect this trend to continue in 2010."

Latest NewsUpgraders and Investors Make Their MoveThursday, 17 November 2016

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