From Bloxo:
Australian housing prices are lifting strongly, supported by low interest rates, and despite only weak jobs growth in recent months. Today’s data showed that capital city housing prices rose by +1.6% in September and by +3.7% over Q3, to reach a new record level. Improvement in the housing market has been matched by a lift in consumer sentiment in the past two months. Retail sales data, also out today, showed a modest rise of +0.4% in August to be +2.3% higher y-o-y. The beginnings of a local housing price boom are expected to limit the RBA’s willingness to cut interest rates any further.
Facts
– Capital city housing prices rose by +1.6% in September and by +3.7% over Q3 to be +5.5% higher over the year.
– Across the capital cities, housing price growth has been strongest in Sydney (+8.0% y-o-y) and Perth (+7.6% y-o-y).
– Retail sales rose by +0.4% in August (market had +0.3%), but were only +0.3% higher over the three months to August and
up +2.3% y-o-y.Implications
The RBA’s monetary policy setting is getting traction in the housing market. Housing prices rose at their fastest pace in over three years in Q3 and the timeliest of the housing price data suggested that housing prices have reached a new record high in Australia.The housing market is being supported by low interest rates, with the RBA’s cash rate already at its lowest level in over 53 years and mortgage rates also around record lows. The lift in the housing market is occurring despite weak employment growth in recent months and the drift upwards in the unemployment rate. A rising housing market is likely to be one factor contributing to a recent lift in consumer confidence.
Today’s retail numbers were more subdued, though they were a little stronger than the market expected. Retail sales rose by +0.4% in August to be +2.3% y-o-y. We expect a continued modest pick-up in household consumption in the second half of 2013 and into 2014.
Bottom line
Housing prices rose by a strong +3.7% over Q3, the strongest rise in over three years.Retail data were more subdued, though they were a little stronger than expected, rising by +0.4% in August and +2.3% y-o-y.
We continue to expect that the beginnings of a local housing price boom may limit the RBA’s willingness to cut interest rates any further.
Correct and largely irrelevant. The question now is, what and when is the disgraced RBA going to do to rein it in? The longer it goes the harder it will be to stop as mining investment falls away.
