Damon's swooning fans happy

House prices surge nearly 10pc

AUSTRALIAN house prices rose 3.2 per cent in the June quarter, and nearly 10 per cent over the past year, the Australian Bureau of Statistics said today.The ABS's house price index for the June quarter shows house prices in capitals across the nation on average grew 3.2 per cent, the fastest pace of growth in a year. This compares with an upwardly revised 1.4 per cent rise in the March quarter.In the year to June, the house price index increased 9.2 per cent.House prices rose over the June quarter as the country's strong economy and jobs market helped even weaker state markets gain ground.Nationwide Notably, house prices in Sydney grew at their fastest pace since the tail end of the housing boom in late 2003, rising 2.3 per cent in the three months to June. Elsewhere, house prices in Melbourne rose 5.0 per cent in the June quarter, in Brisbane they rose 6.5 per cent and in Adelaide they rose 5.7 per cent. In Hobart they rose 2.3 per cent and 2.9 per cent in Canberra. However, in the resources boom capital of Perth they fell 0.9 per cent, and in Darwin they declined 1.4 per cent.Rate rise 'could dampen price growth'Some economists believe today's interest rate rise could dampen house price growth in the coming months.The RBA raised the official interest rate by 25 basis points to 6.50 per cent.RBC senior economist Su-Lin Ong said the rate rise may slow house price growth in the months ahead."We may not see this kind of house price appreciation in the coming quarters," she said.However, she said there were still some reasonably supportive factors for the housing market, with a strong labour market, continued borrowing, and a reasonably firm equity market.Ms Ong said the rise in house prices across the country was strong, with annual growth close to double digits."I think interestingly, the big states in terms of Sydney and Melbourne, have shown a fair pick-up in terms of prices in 2007, and Melbourne is running double digits," she said. "The two big states, which were laggers, have definitely picked up. "I think it's very consistent with the view that housing activity, prices and borrowing all definitely stepped up in 2007 and are part of the reason, I guess, the RBA (Reserve Bank of Australia) lifted rates this morning."ANZ head of financial system analysis Paul Braddick said today's rate rise will be insufficient to derail the momentum in house prices coming from solid economic and market fundamentals.He said the three interest rate rises last year were more than offset by a combination of solid gains in average household incomes and significant income tax cuts.Rising house prices 'reflect buoyant economy' Mr Braddick said the reacceleration of house prices, outside of Perth and Darwin, reflected buoyant economic conditions and a marked tightening of housing market fundamentals. "A tightening housing demand/supply balance is reflected in plunging vacancy rates and strong growth in rents and rental yields in most capital cities," he said. "Sales volumes, clearance rates and prices have all improved markedly this year and with new housing supply falling well short of underlying housing demand, market fundamentals will continue to tighten in the year ahead." Mr Braddick said the impact of higher interest rates and continued rises in house prices will cause housing affordability to deteriorate further in the year ahead. Grange Securities chief economist Stephen Roberts said the figures released today suggest the demand side of housing was in pretty good shape. "Including in Sydney which is interesting; Sydney picked up 2.3 per cent in the most recent quarter ... what we're seeing is a bit of rotation in the housing market," Mr Roberts said. "And there's still strength in places like Perth. "Although their prices did fall in the (June) quarter by 0.9 per cent, they're still up over 15 per cent year-on-year." "All told, these figures suggest the demand side of housing is in pretty good shape. "We're still getting a pretty lacklustre response from the supply side, but if anything that will be likely to pick up as we go further down the track."