Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
House prices rose 6.7 per cent in the June quarter, the fastest pace in quarterly growth in at least 18 years, the Australian Bureau of Statistics says.
The residential property index, which is the weighted average of Australia’s eight capital cities, was 16.8 per cent higher over the year.
“The continued growth in property prices was occurring at a time of record low interest rates,” ABS head of prices statistics Michelle Marquardt said.
“Persistently low levels of stock on the market were being met with strong demand and properties transacting at an increasingly rapid rate.”
The total value of Australia’s 10.7 million residential dwellings rose by $596.4 billion to $8.9 trillion in the June quarter, the largest quarterly rise since ABS began the series in 2003.
The mean price of residential dwellings in Australia rose by $52,600 to $835,700.
More up to date data complied by CoreLogic showed annual house prices rose 18.4 per cent in the year to August.
Reserve Bank of Australia assistant governor for economics Luci Ellis told federal politicians supply was a major factor in driving prices higher.
“You don’t increase affordability by giving people more money to spend on housing. All that does is bid up prices,” Dr Ellis told an inquiry into housing affordability and supply.
“You certainly don’t improve people’s welfare by making it easier for people to borrow more and more.”
She said that was the policy solution that was chosen in the US in the 2000s, which resulted in the global financial crisis.
Building more homes would not bring down prices either, but it did matter, she said.
“The important point is if you want lower housing prices you don’t get there by increasing demand,” she said.
Treasury officials told the House of Representatives standing committee on tax and revenue that government initiatives have assisted home buyers over the hurdle of saving for a deposit.
But Crystal Ossolinski, director of the department’s domestic demand unit, said interest rates had a key impact on the housing market.
“Over the past year we’ve seen debt servicing increase a little bit, it certainly has not increased in line with prices and this reflects interest rates rates have fallen dramatically,” she said.
The RBA’s cash rate, which steers the interest rate on mortgages offered by retail banks, sits at a record low 0.1 per cent.
The central bank does not expected to lift the rate before 2024.
Treasury officials dismissed the suggestion that housing investors had a more beneficial tax arrangement over owner-occupiers, such as through negative gearing and the capital gain tax gains.
They pointed out that owner-occupiers didn’t pay any capital gains on their property, which is also not included in the pension assessment.
They argued investors added to housing supply by renting out their properties, which also keeps rents low.
But they said state government zoning needed to be looked at, along with stamp duty, which might help affordability.