Sydney House Prices Soar to Biggest Gain in 13 Years
08-04-2015
by Michael Heath and Narayanan Somasundaram
Sydney house prices soared in July by the most since December 2002, underscoring why regulators are cracking down on property investors.
House prices jumped 18.4 percent from 12 months earlier in Australia’s biggest city and 11.5 percent in Melbourne, CoreLogic Inc. said Monday. From June, Melbourne surged 4.9 percent, its largest monthly increase on record.
Buyers have scooped up property following the central bank’s two interest-rate cuts this year to a record-low 2 percent as policy makers try to kick start the national economy. The ensuing housing bubbles in the nation’s two biggest cities prompted pressure from regulators on lenders, some of whom have responded with higher borrowing costs for investors.
“While my survey shows demand is still intact, changes by lenders will hurt at the margins and slow the pace of growth,” said Martin North, principal at researcher Digital Finance Analytics in Sydney. “Home prices in places such as Sydney are at the highest relative to income, so there’s the question of affordability. I expect prices to climb 5 percent to 8 percent over the next year.”
The nation’s largest mortgage lenders -- Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia, National Australia Bank Ltd. and Westpac Banking Corp.-- raised some mortgage rates last month after the regulator forced them to hold more capital against potential losses.
Commonwealth Bank, Westpac and ANZ increased variable rates for landlords by 27 basis points, while National Australia raised rates on interest-only loans by 29 basis points.
Reflecting a hollowing out of the nation’s manufacturing industry, house prices in the industrial hub of Adelaide slumped 1.1 percent in July from a month earlier. Property in Perth, capital of the mining powerhouse of Western Australia, fell 0.3 percent from a year earlier as the boom unwound.