The recent slowdown in sales and price growth should quiet concerns of an overheated Australian property market. New home sales are slumping along with construction, as interest rate hikes have eroded demand and builders have found land and credit in short supply. See the following article from Property Wire for more on this.
The rise of residential real estate prices in major cities in Australia is slowing and the number of new properties being sold have dropped to a three month low, the latest figures show.
They have been generally welcomed by commentators who had feared that Australia was heading for a property bubble.
Prices recorded their second straight month of single digit growth in May, according to the latest RP data-Rismark Hedonic Home Value Index. Values grew by a seasonally adjusted 0.5% in May, up marginally from the 0.2% recorded in April.
The slowdown follows 16 months of strong house price growth. Year on year prices have risen in capital cities by 12.1%.
‘This second consecutive month of single digit annualized gains sends a signal that the double digit growth rates recorded since January 2009 are behind us,’ said RP Data’s director of research Tim Lawless.
‘The signposts have been in the market for several months now with lower auction clearance rates, fewer housing finance commitments and weakening consumer confidence,’ he added.
The index shows that prices increased 2.4% in Sydney, 3.3% in Melbourne, 3.7% in Canberra, 2.3% in Adelaide and just 0.8% in Brisbane. Prices fell 2.1% in Perth and 1% in Hobart.
According to the latest figures from the Housing Industry Association sales of new properties are falling as rising interest rates continue to dampen demand for housing.
New homes sales fell a seasonally adjusted 6.4% to 8,024 units in May following a 6.2% rise in April. It was the lowest number of new homes sales since February 2010. Private house sales fell 5.9% in the month while sales of multi-units were down 11.6%.
HIA chief economist Harley Dale said new home sales had flattened recently as interest rate rises started to crimp demand. The Reserve Bank lifted the cash interest rate by a quarter of a percentage point to 4.5% in May, its sixth increase in seven months.
‘There is no sustained upward momentum in new home sales in 2010 because higher interest rates and concerns over the threat of further rate hikes are dampening demand,’ Dale said.
‘Meanwhile, supply side obstacles, including a lack of affordable land and tight credit availability for residential development, are weighing down considerably on the new home building sector,’ he added.
This article has been republished from Property Wire. You can also view this article from Property Wire, an international real estate news site.