SYDNEY, Feb 3 (Reuters) - Home prices across Australia’s major cities rose 1.2 percent in January, from the previous month, extending a strong run that has boosted household wealth and confidence.
Figures from property consultant RPData-Rismark showed overall dwelling prices were up 9.8 percent compared to January last year, led by a 13.4 percent jump in Sydney. Prices in Melbourne followed with a gain of 11.9 percent while Perth saw an increase of 6.9 percent.
Home values were now 4.8 percent higher than their previous peak in October 2010.
While higher prices have stirred talk of a bubble, they are considered by policymakers as necessary to encourage a much-needed revival in home building.
The Reserve Bank of Australia (RBA), which cut interest rates to an historic low of 2.5 percent last August, has been counting on home construction to provide vital support to the economy as a long boom in mining investment cools.
The central bank holds it first policy meeting of the year on Tuesday and is widely expected to hold rates steady given signs that they are working to revive demand in the economy.
“The sustained growth in dwelling values is another factor the RBA is likely to consider when deliberating on any movement in the cash rate,” said RP Data research director Tim Lawless.
Still, Lawless doubted prices could continue to rise at the current pace given very low rental yields, increasing affordability constraints and higher levels of housing supply. (Reporting by Wayne Cole; Editing by Shri Navaratnam)