Australia home prices' long decline pauses on rate cut prospects
SYDNEY, May 27 (Reuters) - Australian home prices saw a
tantalising hint of stability last week as the hard-hit market
drew support from the prospect of lower mortgage rates and a
continuation of tax breaks for property investing.
A pause in price declines would be welcome news for the
entire economy since sliding prices have been undermining
confidence and consumer spending power.
Australia's housing stock is valued at A$6.8 trillion
($4.71 trillion), or almost four times the country's annual
gross domestic product.
Data from property consultant CoreLogic out on Monday showed
home prices in the capital cities edged 0.1% higher last week,
breaking months of steady declines.
Sydney saw prices rise 0.3% for the week and Melbourne
firmed 0.1%, again the first increases in months.
Values were still down for the month but a sharp rise in
auction clearance rates to 62.6%, spoke of improving demand.
"Auction markets posted their best results since April last
year with preliminary clearance rates nearly hitting 70% in
Sydney and just under 63% in Melbourne," said Matthew Hassan, a
senior economist at Westpac.
The market was helped by expectations of falling mortgage
rates after the head of the Reserve Bank of Australia (RBA) said
a rate cut would be considered at its next policy meeting on
The futures market implies an 84% probability of a
cut next week and is fully priced for a move to 1% by October.
Indeed, investors have priced in a real chance of reaching 0.75%
by the middle of next year.
Australia's banking regulator added to the uplift by
proposing to relax rules for how banks check people's ability to
service home loans, essentially allowing them to borrow more.
Also likely aiding sentiment was the surprise election
victory of the conservative Coalition government on May 18 and
its pledge to keep tax breaks for home investment.
The opposition Labor Party had campaigned on removing or
curbing certain perks.
"The extent to which this generates a recovery in housing
markets remains unclear," cautioned Westpac's Hassan. "While the
initial response is positive, it remains to be seen how much
'follow through' the move has."
Economists, including those at AMP and Citibank, have scaled
back estimates for how far prices may ultimately drop. Property
and mortgage brokers who spoke to Reuters last week said they
have seen a noticeable jump in customer inquiries, including
from those buying a home for investment.
($1 = 1.4434 Australian dollars)
(Reporting by Wayne Cole
Editing by Shri Navaratnam)
First Published: 2019-05-27 01:00:04
Updated 2019-05-27 03:39:48
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