July 1, 2014 / 1:05 AM / 3 years ago

Australia home prices rebound by 1.4 pct in June-RPData

SYDNEY, July 1 (Reuters) - Australian home prices rebounded across the capital cities in June, recouping much of May’s decline and suggesting there was still life left in the housing market.

Figures from property consultant RPData-Rismark showed dwelling prices rose 1.4 percent in June, from May when they had fallen 1.9 percent.

May’s decline had prompted talk the market was out of puff and due for a large correction. But the data are not seasonally adjusted and the market can swing sharply from month to month.

Prices were 10.1 percent higher than in June last year, a moderate slowdown from May’s pace of 10.7 percent. Clearance rates at home auction remained firm at around the 60 percent mark, while demand for mortgages was relatively high.

Sydney and Melbourne again boasted the biggest gains in June, as they have for the past year. Home prices in Sydney were 15.4 percent higher than in June last year, while Melbourne saw gains of 9.4 percent.

Rising home prices have been welcomed by policymakers as necessary to encourage a much-needed revival in home building, which is indeed underway.

The Reserve Bank of Australia (RBA) is counting on home construction to provide vital support to the economy as a long boom in mining investment cools.

The central bank recently played down fears that a bubble might be forming in the market, but has warned investors not to count on double-digit price increases indefinitely.

RP Data research director Tim Lawless said there had been a moderation in the trend growth of prices to a more “sustainable level”.

“With interest rates remaining low for the foreseeable future, it is doubtful that housing values will start to slide, at least not at a macro level,” said Lawless.

The RBA holds its July policy meeting on Tuesday and is considered certain to keep rates at a record low of 2.5 percent, where they have been seen since a cut in August last year.

“What is more likely is that natural affordability constraints will start to dent buyer demand, as will the low rental yield scenarios that are very much evident across Melbourne and Sydney,” said Lawless.

He estimated gross rental returns were running at just 3.9 percent for capital city houses and 4.6 percent for units. (Reporting by Wayne Cole; Editing by Shri Navaratnam)

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