House price growth shows effect of interest rate uncertainty

The recently released Australian House Price Indexes for March 2011 from the Australian Bureau of Statistics shows most capital cities recorded a reduction in value for the 3 months to 31st march 2011.

This is largely a result of the market absorbing the string of interest rate rises by the Reserve Bank of Australia, last of which was in Novemeber 2010.  Many buyers were concerned that further interest rate rises were coming and have held off their purchase decisions and adopting a "wait and see" approach.

The Brisbane market recorded the largest drop over 12 months which is primarily a result of the recent floods that swept through Brisbane in January 2011 and this should be a short term effect as that city has quickly moved to rebuild and recover the damage caused in the floods and confidence will quickly return.

Melbourne recorded the equal largest quarterly fall at 2.5% (same as Brisbane) which is a clear sign of the slowing market, a natural occurrence after a few solid growth years.  For thise seeking to invest in Melbourne, it is essential that you seek quality and value as it is unlikely that the high gains of the past 3 years will be repeated as the market moves from its high growth phase into a slow growth phase.  Demand remains strong, so this market will remain attractive in the long term.

Sydney recorded a fall in values for the quarter, which is a result of interest rate uncertainty which affects the high value Sydney market more than others, so it is no doubt due to benefit from the fact that interest rates have not in fact been increased since Novemeber and remain unlikely to do so.  Demand pressures and supply constraints shall push this market strongly upwards in the near future.

Perth defied the national trend to record a modest 0.5% increase over the quarter, which demonstrates that the market has come close to the end of its uncertain period and a growth cycle is not far away, good value remains in the Perth market for the astsute investor.

Overall the figures show how reliable Australian proeprty cycles remain, and this cool off period is likely to be short lived as the fear of rate rises that caused it has now subsided and a period of stability has remained for almost 6 months.

This is likely to fuel a increase in the level of buyer activity that will further strengthen and support the Australian property market with good growth opportunities in the markets due to enter their high growth phase (Sydney, Brisbane & Adelaide) improvement in the markets moving to moderate growth (Perth & Tasmania) and normalisation in the Melbourne market that finishes off their high growth phase and moves to a slower growth stage of the cycle.