House prices rise slightly in first two months of 2009

House prices have risen slightly in the first two months of the year thanks to lower mortgage rates and boosts from the Government’s grants to first-home owners.

The RP Data-Rismark Hedonic Index figures show that housing prices across the country rose 1.1%, while Darwin, Melbourne and Sydney recorded the highest gains.

Housing prices continued to fall in Brisbane, Adelaide, Perth and Canberra. Unlike the past two years, lower-priced dwellings have experienced the highest gains while the top end of the market has been hit hardest.  

The data shows that the top 10% of dwellings in Sydney have lost more than 12% of their value in the past 12 months.

The biggest declines in value were recorded in Brisbane, where the average price fell 2.2% to $413,700, followed by a 1.8% decline in Canberra to $438,900.

Housing Industry of Australia chief economist Harley Dale says that RP Data’s figures are consistent with what the HIA has been hearing from real estate groups.  

“You’ve got some weakness at the higher end of the market that’s been widely spoken about for some time now,” Dale says. “You’ve got support at the low end and flat lining in the middle.”

He also says that the outlook for the housing sector over the next 12 months will continue to remain relatively positive.

“The top end of the market will probably continue to be weak, and that’s not surprising, so 2009 will be reasonably steady with perhaps some moderate falls in some areas. You’d have to say that’s a very good result given what’s going on elsewhere in the world.”

CommSec chief economist Craig James agrees, saying that “prices are more likely to rise, not fall, in coming months”. But James also says this may not be a good thing, as increased lending practices may create housing affordability issues in the lower ends of the market.

“More lending is occurring in response to lower interest rates, especially for housing,” he says in a research note.  

“In fact the strength of housing lending may be creating some problems. Demand for homes is soaring in some areas, pushing prices higher and weakening housing affordability.”

A new survey from Fujitsu Consulting has also shown that the Government’s new-home owner grant is a driving force behind higher sales, and that without it, higher housing prices would become a challenge.

The survey of 2000 households found that the number of first-home buyers who said they could afford to buy homes jumped from 21.5% in June 2008 to 53.4% in March 2009.

The figures also show that in June last year, 56% of respondents claimed the first-home owner grant was “vital” in securing a home, while that figure has now jumped to 85.4%.

The increased Government housing grants are expected to expire in July, while it is unconfirmed whether the higher payments will be extended through the rest of the year.  

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