Australian house prices are still climbing at rates that would make most assets blush

Italy’s Lisa De Martini climbs during the semi-final of 2017 International Federation of Sport Climbing (IFSC) Climbing World Cup in Briançon on July 28, 2017. Jean-Pierre Clatot / AFP / Getty Images

Australian house prices posted their fifth straight quarter of growth in the three months to the end of June, data from the ABS shows.

On a weighted average basis, home values across Australia’s capital cities rose by 1.9%, beating forecast growth of 1.3%.

That led to an annualised gain of 10.2%, which was consistent with the March quarter.

To put this in perspective, other data out today from SuperRatings, which tracks the performance of Australian super funds, showed that the average annual return of a fund that had more than half its assets exposed to growth opportunities returned 7.7% over the past year.

The ABS data on property prices shows house price growth remained steady in the three months to June, despite the introduction of macro-prudential measures by APRA at the start of the quarter.

Those measures capped the amount of interest-only mortgages banks could issue at 30% of all new loans.

The results reaffirm that despite concerns about excessive price growth and financial stability risks, housing remains one of the most competitive asset classes for Australian investors.

According to the ABS, the latest quarterly increase took the overall value of dwelling stock to $6.726 trillion — around four times the size of Australia’s GDP.

As expected, Sydney and Melbourne topped the quarterly price growth table, recording gains of 2.3% and 3.0% for the quarter respectively. That took the annual rise for both cities to 13.8%.

On an annualised basis, it marked a slight drop for the Sydney market, which had a 14.4% increase in the previous quarter. Melbourne house prices continued to rise after posting a 13.4% gain in the three months to March.

Among other notable performers, Hobart’s housing market continued to perform strongly with a 1.4% rise to June, after gaining 3.4% in the March quarter.

This table from the ABS breaks down the quarterly growth for each capital city:

Source: ABS

Although the quarterly result beat expectations, more recent data suggests that house price growth is in fact starting to cool.

Auction clearance rates have slowed since July, and weekly data from CoreLogic shows that price growth has been trending lower — at least compared to the rapid rate of growth seen in recent years.

“Looking ahead, the further slowdown in house price inflation on the more timely CoreLogic figures in July and August suggest that national house price inflation on the ABS measure has peaked,” said Capital Economics chief economist Paul Dales.

“A further easing would be consistent with the recent tightening in credit conditions and rises in mortgage rates for investors. And most of any slowdown will probably take place in Sydney and Melbourne.”

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