CHART OF THE DAY: House Prices Will Keep Rising, Especially In Sydney And Melbourne

Westpac released their Redbook on Friday, which is a wrap of the state of the Australian economy based on the many questions included in the Westpac Melbourne Institute Consumer Sentiment survey they conduct each month.

It has a raft of important leads on the economy and particularly the consumer sectors, but one of the questions that stands out is the one Westpac asks about expectations for house prices. In the Redbook, Westpac said:

The Nov update shows price expectations continuing to firm from already high levels, the Index rising 7.6pts to 168.0. This is well above the average read of 136.1, but below the peak of 184.2 in Apr 2010. Just under 74% expect prices to rise in the next 12mths, with 12% expecting a gain of over 10%. Just 5.8% expect a decline.

Latest data shows a clear step-up in growth since mid-year. Nationally, the last 6mths has seen prices rise at a 10.3% annual pace. The Sydney market has been particularly strong. Price expectations have shown the sharpest rise in Vic though. Expectations are more subdued in Qld and WA, the latter still down on its Apr peak.

The wealth effect is important in spending, and after many years of saving, households in the big centres of Sydney and Melbourne might start to open their wallets a bit more which will be good news for an economy in transition.

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