SYDNEY—House prices fell for the first time in nearly three years in the June quarter, as high interest rates and cost of living pressures kept buyers on the sidelines, economists say.
The Australian house price index fell by 0.3 per cent in the three months to June, the Australian Bureau of Statistics (ABS) said today.
It was the first quarterly decline since September 2005.
The ABS also downwardly revised the rise in the March quarter to 0.4 per cent, from 1.1 per cent.
CommSec chief equities economist Craig James said house prices were "about right", given they rose by 8.2 per cent over the year to June, identical to the 20-year average of the index.
"Clearly house prices have slowed markedly over the past six months, but that is hardly a surprise in the wake of sharp rises in mortgage interest rates," Mr James said.
"But in contrast to the last slowdown in 2005, Australian house prices have been quite resilient."
The Reserve Bank of Australia (RBA) has raised interest rates four times between the beginning August last year and March to a 12-year high of 7.25 per cent.
As well, the commercial banks have lifted their mortgage rates independently of the central bank's decisions, reflecting higher borrowing costs on wholesale money markets.
The RBA holds its monthly board meeting tomorrow and economists expect rates to stay on hold.
But speculation has grown that interest rates have peaked and are on their way down, sooner rather than later, given a recent run of weak economic indicators.
Retail sales recorded their biggest monthly decline in seven years in June, the share market continues to suffer heavy losses and building activity remains weak.
AAP economist Garry Shilson-Josling said house prices could face more pressure in the months ahead.
"There is obviously a lot of pent-up demand for housing, but this seems unlikely to find expression in higher housing prices until the economy stops slowing and interest rates are cut a few times," Mr Shilson-Josling said.
"In the meantime, all the signs are that the economy is slowing and that unemployment will head higher.
"That suggests that before it recovers, the housing market might face an even sterner challenge - significant numbers of indebted homebuyers suddenly finding themselves without an income."
Mr James said demand from a population growing at the fastest rate in almost 20 years, extremely low vacancy rates and a lack of building activity would support house prices.
And talk of rates coming down may also reignite investor interest.
"If rates are cut in coming months, investors could easily swing from cash-based investments and the sharemarket to the property market," Mr James said.
Perth recorded the largest quarterly decline, with house prices falling by 2.4 per cent in the West Australian capital.
Prices in Hobart declined two per cent, they were down 1.4 per cent in Canberra and 0.3 per cent in Melbourne.
Prices rose in Darwin (up 1.9 per cent), Brisbane (0.6 per cent), Adelaide (0.4 per cent) and Sydney, where prices inched 0.3 per cent higher.
Today's data follows last week's survey from online real estate data group Australian Property Monitors (APM), which found median house prices fell in five of Australia's eight capital cities in the three months to June 30.
APM general manager Michael McNamara said the survey's results were the weakest since 2004.
Factbox on percentage changes in weighted average house prices in major capital cities:
June quarter Year to June quarter.
Sydney 0.3 pct 4.4 pct
Melbourne -0.3 pct 14.1 pct
Brisbane 0.6 pct 14.0 pct
Adelaide 0.4 pct 16.2 pct
Perth -2.4 pct -0.9 pct
Hobart -2.0 pct 3.0 pct
Darwin 1.9 pct 7.0 pct
Canberra -1.4 pct 7.2 pct
(Source: Australian Bureau of Statistics)
