House prices have eased over the first part of 2011, further justifying another rate hold.
According to the latest ABS index of established house prices, overall values eased by 1.7 per cent in the March 2011 quarter to be effectively flat over the year – the price index was 0.2 per cent lower compared to the March quarter of last year.
“The ABS existing house price series is subdued at present, consistent with the buyers’ market that has been in play for some time and with the ongoing justification for interest rates to remain on hold. We continue to expect a flat to slightly weaker trajectory for existing house prices over the course of 2011, as is currently playing out, with a solid floor being provided by Australia’s strong underlying fundamentals for housing,” HIA chief economist Harley Dale said.
“Today’s update bears some resemblance to the 2.2 per cent decline reported two years ago for the March 2009 quarter ABS update. Talk then of impending doom and gloom for Australian property prices proved wide of the mark and any repeat of such exaggerated claims following today’s ABS numbers will once again be well wide of the mark.”
The ABS price index of project houses on the other hand, increased by a modest 0.8 per cent in the March 2011 quarter to be up by 2.8 per cent compared to the March quarter of last year.
However, this is slower than the headline inflation rate which was up by 3.3 per cent over the same period.
"Residential construction activity is weakening at present and now is a good time for people to contemplate building or renovating a home,” Mr Dale said.
The capital city project house price index increased in the March 2011 quarter by 1 per cent in Sydney, 1.3 per cent in Melbourne, 0.5 per cent in Brisbane, 0.7 per cent in Adelaide, 0.3 per cent in Perth, 0.1 per cent in Hobart, 0.4 per cent in Darwin, and 0.8 per cent in Canberra.