March 31, 2014 / 11:32 PM / 5 years ago

Australia home prices jump 2.3 percent in March: RPData

SYDNEY (Reuters) - Home prices across Australia’s major cities jumped by 2.3 percent in March while gains became more broad-based, a strong result that will fan concerns speculative buying is running too hot for policy makers’ comfort.

A man works on a house in Sydney in Sydney November 4, 2008. REUTERS/Daniel Munoz

Figures from property consultant RPData-Rismark showed overall dwelling prices were up 10.6 percent compared to March last year, led by 15.6 percent growth in Sydney.

The gains were also broader with every major city recording a monthly increase in March. Over the whole first quarter, Melbourne boasted an increase of 5.4 percent, while Sydney added 4.4 percent and Brisbane 1.5 percent.

“Over the long term, I don’t believe such a strong pace of growth can be sustained - we expect housing market conditions to cool down as the year progresses,” said RP Data research director Tim Lawless.

“If the pace of capital gains doesn’t slow, we may see higher interest rates realized much earlier than previously expected.”

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

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.

Yet the central bank has become more concerned about a surge in borrowing to buy homes for investment, warning that double-digit price increases cannot be sustained.

Prices have already risen well ahead of rental yields, with the typical capital city house providing a gross yield of just 3.8 percent and units 4.6 percent.

While capital city home values were up 12.5 percent since May last year, weekly rents increased by just 1.8 percent.

The premium market remained the best performer. Dwelling values across the most expensive quarter of the market were up 7.2 percent over the past six months while the lower priced quarter saw values lift by 4.9 percent.

Reporting by Wayne Cole; Editing by Shri Navaratnam

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