Australian house price index up 4.2%

02/11/2009

The Australian house price index rose 4.2 per cent in the September quarter, the Australian Bureau of Statistics said on Monday.

This compares with an unrevised 4.2 per cent rise in the June quarter.

In the year to September, the house price index rose 6.2 per cent.

The median market forecast was for the house price index to have risen 3.4 per cent in the September quarter and to have risen 4.8 per cent in the year to June 30.

CommSec chief economist Craig James said the September quarter result was, at face value, a strong number, but he said the local central bank preferred to focus on other measures of house prices.

"The Reserve Bank has made it clear that they focus on the RP Data-Rismark figures rather than the Bureau of Statistics figures, because the ABS figures do not include apartments and are compiled in a different way," Mr James said.

"The RP Data (figures) are substantially lower than the Bureau of Statistics figures and they are seen as a better indication of what's happening in terms of house prices."

Mr James said the ABS report provided little new information for policymakers.

"The Reserve Bank's probably going to take little notice of them," Mr James said.

In the year to the September quarter, the house price index rose 6.2 per cent, which was above market expectations of a 4.8 per cent increase, the ABS report said.

Mr James said the September quarter figures represented the "maximum effect" amount of government stimulus being applied to the housing industry.

"What is happening with home prices is that they are rising modestly at the moment but really not enough to frighten the horses, not enough to concern the Reserve Bank," Mr James said.

"The Reserve Bank would be well aware that things like government stimulus, the first home buyers boost as well as super low interest rates are artificially pushing up house prices."

In the September quarter, the first home owner grant was worth $14,000 for those buying an established home and $21,000 for those buying a new home or building their own home.

It was reduced to $10,500 and $14,000, respectively, from October 1.

The Reserve Bank of Australia (RBA) kept the cash rate unchanged at three per cent at its three board meetings in the September quarter.

In October, the central bank lifted the cash rate to 3.25 per cent.