Surging house prices pressuring RBA rates move

SURGING property prices have increased the pressure on the Reserve Bank to lift the official interest rate when it meets tomorrow.

Housing prices have climbed almost 13 per cent nationally to a median price of $455,000 putting pressure on the RBA / AP

SURGING property prices have increased the pressure on the Reserve Bank to lift the official interest rate when it meets tomorrow.

While economists are split on the chances of an April rate rise, the numbers tipping a rise increased last week amid new data showing strong property price growth and RBA Governor Glenn Stevens warning about housing values in a surprise television interview.

A report released last week by RP Data and Rismark International found auction clearance rates have jumped by up to 70 per cent in the past 12 months, and dwelling values nationally have climbed 12.7 per cent over the same period to a median price of $455,000.

RP Data national research director Tim Lawless said the strong growth would give the RBA food for thought tomorrow.

"A further rate rise may be aimed at taking some of this heat out of the market,” he said.

"However, the strong gains need to be viewed in balance as the Reserve will also be factoring the slow retail market and sluggish dwelling approvals into their thinking."

AMP Capital Investors chief economist Shane Oliver said tomorrow’s RBA decision would be a "very close call" but he expected a rate rise of 0.25 of a percentage point.

"RBA Governor Glenn Stevens’ surprise appearance of TV warning of the dangers of home buyers borrowing too much clearly indicates that the RBA is very concerned about the continuing surge in house prices, and the risk that it might turn into an unsustainable bubble," Dr Oliver said.

"Strong house price gains are adding to pressure for the RBA to lift rates again," he said.

Smartline Personal Mortgage Advisers said its average loan size had jumped about 30 per cent in the past 12 months.

Smartline managing director Chris Acret said a chronic lack of property across Australia was pushing up property prices and making it tough for many to enter the market.

"It’s increasingly becoming a market of the haves and the have nots," he said.

"While we have seen strong investor activity in the past two months, we know that there are many people struggling to be able to buy a home, either due to availability or affordability."

An AAP survey of 15 economists late last week found nine of them expect the RBA to lift the rate tomorrow by 0.25 of a percentage point, which would increase the repayments on a $300,000 mortgage by $45 a month. Six economists expect no move this month.

CommSec chief economist Craig James said the annual growth rate in house prices was at a 25-month high, but he did not expect an upwards move from the RBA tomorrow.

"Given the weakness in consumer spending and building approvals, the Reserve Bank should not rush the rate rise, especially given that the inflation environment remains very weak," he said

Rising house prices

In Sydney, the median house price climbed 3.9 per cent in the three months to February, and 12.8 per cent over the year to $610,000, according to the RP Data-Rismark Hedonic Home Value Index.  The median unit price rose 3.6 per cent in the quarter to $435,000 and is up 11.1 per cent year on year.

In Melbourne, the median house price climbed 5.1 per cent in the three months to February, and 19 per cent over the year to $515,000.  The median unit price rose 6.5 per cent in the quarter to $421,000 and is up 20.1 per cent year on year.

In Brisbane, the median house price climbed 0.1 per cent in the three months to February, and 6.1 per cent over the year to $458,000, while unit prices rose 2.2 per cent in the quarter to $379,000 and is up 8.2 per cent year on year.

In Adelaide, the median house price climbed 2.7 per cent in the three months to February, and 9.1 per cent over the year to $405,000.  Unit prices rose 1.9 per cent in the quarter to $325,000 and is up 9.3 per cent year on year.

In Hobart, the median house price is now $346,500 and is up 7.4 per cent for the year to January 31, and the median unit price is up 11.1 per cent year on year to $270,000.