Credit: News.com.au- Capital city house prices up 20pc on year
- Sydney, Melbourne up more than 20 per cent
- RBA will hike tomorrow, says Westpac
- Economist: House prices won't implode
AUSTRALIAN capital city house prices have risen by 20 per cent over the year to March, latest government data shows.
The Australian capital city house price index, released today by the Australian Bureau of Statistics shows house prices rose by 4.8 per cent over the quarter alone, putting pressure on the Reserve Bank to further lift interest rates when it meets tomorrow.
However, some economists are cautioning against taking the ABS data at face value.
Westpac economists Andrew Hanlon and Elliot Clarke said in a note the ABS measure was "prone to overstating price swings" when there were shifts in the make-up of market activity.
"Our preferred measure, and the measure watched closely by the RBA, the RP Data–Rismark series reports house prices up 12.7 per cent over the year to the month of March," the economists said.
Today's data shows Melbourne house prices rose nearly 28 per cent, Sydney house prices increased 21 per cent and Darwin prices increased by more than 17 per cent.
All capital cities posted double-digit growth over the year to March.
Brisbane, Adelaide and Perth had more measured growth with 12.1 per cent, 10.8 per cent and 15 per cent growth respectively.
Hobart increased 14.1 per cent and Canberra house prices jumped 20.6 per cent.
The ABS said Sydney and Melbourne were the main contributors to the average price of the eight capital cities.
"The strongest growth in these two cities came from established houses with relatively high prices," the ABS said.
CommSec economist Savanth Sebastian told AAP there was nothing too surprising following five rate increases in the past seven months.
"Property prices are still seeing strong growth and it's important to realise that this isn't going to be solved by raising interest rates," he said.
Market to cool off - ANZ
ANZ economist David Cannington said while momentum has remained strong, he expects house price growth to "moderate" over the rest of 2010.
"This will be compounded by ongoing reductions in first home buyer demand and the recent policy back flip on Foreign Investment Review Board rules," he said in a note.
However he said the strong data proved the fundamentals of the housing market were tight, and demand continued to outpace supply.
"Solid market fundamentals and a positive economic outlook should keep house price growth in the black," Mr Cannington said.
Rates will rise tomorrow - economists
Westpac said price momentum in 2010 had been "resilient".
"Recent strong auction clearance rates suggest any cooling off in housing markets has been marginal, at least for those parts of the market that see properties sold via auction."
Mr Hanlon said there was concern over house price resilience in the face of rising interest rates.
"Rising interest rates will become a headwind as the year progresses," he said.
"The RBA hiked in March and again in April, taking the standard variable mortgage rate to 7.15 per cent."
Westpac expects the RBA to hike interest rates when it meets for its monthly board meeting tomorrow.
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