Predictions that house price growth will slow this year are yet to materialise, with new figures showing dwelling prices continued last year's strong increase in January.
National dwelling prices rose by 1.8 per cent over the month according to RP Data-Rismark, more than compensating for a 0.4 per cent fall in December.
The RP Data-Rismark Hedonic Home Value Index shows steep growth in all but two capital cities and gives further evidence that home buyers and sellers are entering 2010 with confidence.
There were 25 per cent more new listings nationwide than the same time last year, RP Data found last week.
Melbourne is still a standout, becoming 4.3 per cent more expensive in the three months to January. Darwin and Canberra are also strong, with prices rising by 4.6 per cent and 4.3 per cent respectively.
The research director with RP Data, TIm Lawless, said he was surprised at the index's strength, but said December and January figures are usually more volatile because there are fewer sales.
He maintains that capital growth should slow this year after dwelling prices rose 11.8 per cent natonally over the past year.
"We do expect capital gains to be lower than last year but it is starting out with a high degree of confidence," Mr Lawless said. "Interest rates will be the big wild card here, in terms of how high and how fast they will go."
January was always a quiet month, but sales in the resort market of Portsea on the Mornington Peninsula, which start earlier and rely on healthy discretionary income, provided a glimpse of things to come, the executive chairman of Kay & Burton in Melbourne, Gerald Delany, said. The firm sold two Point Nepean Road properties for $9 million and $8.75 million just after Christmas.
February didn't disappoint, as a six-bedroom house on Scotsburn Grove in Toorak sold at auction for $200,000 above its reserve for $7 million and a four-bedroom home on nearby Yarradale Road sold for $2.81 million, which was $310,000 above reserve.
"Those results are indicative of how our market is performing this year," Mr Delany said. "This market is a lot busier than we've seen it at this time of year for many years. We see the market continuing in this vein for the foreseeable future."
The RP Data-Rismark report found rental yields fell for both houses and units, but Mr Lawless predicted they would improve as capital growth softens, and first-home buyers go back to the rental market, which will drive up rentals.
ANZ economists Alex Joiner said a likely 100 basis points of interest rates rises this year would cause capital growth to slow. The market would also be less "charged' as first-home buyers fall back and more cautious investors picky up the slack." Upgraders and investors will be a little more cautious than first-home buyers," Mr Joiner said.
Source: Weekend Australian Financial Review
Date: February 27-28, 2010
Author: Ben Hurley
