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"Melbourne leads the housing slowdown"

"Melbourne leads the housing slowdown"

Old Mar 5th 2004, 8:29 am
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Default "Melbourne leads the housing slowdown"

http://www.theage.com.au/articles/20...378908242.html

Melbourne leads a housing slowdown
By Josh Gordon
Economics Correspondent
Canberra
March 5, 2004

Melbourne house prices grew at the slowest rate in the nation last year, with recent evidence suggesting the construction boom is running out of steam after two interest rate rises.

Nationally, house prices surged at the fastest rate in almost 15 years during the final three months of 2003, with Brisbane leading the way.

But in Melbourne, house prices grew by just 3.8 per cent during the quarter, compared with growth of 12 per cent in Brisbane, 5.3 per cent in Sydney and 6 per cent nationally.

Two interest rate rises at the end of last year helped push building approvals down 3.3 per cent in January, the fourth monthly fall in a row. Building approvals eased 12.3 per cent over the four months and were 2.8 per cent weaker than the same time last year.

Treasurer Peter Costello said he expected the housing market to plateau, given signs of an easing in borrowing as well.

"These forward indicators indicate that there is a slowing in the housing market going on," he told Parliament.

"We would expect that that slowing is consistent with the housing market plateauing, and after the strong rises that we have seen over recent years, a plateauing in the housing market may not be an altogether bad thing."

But analysts said that high prices may also have put off buyers temporarily.

Over the year, Melbourne house prices rose by 12.5 per cent, well below Brisbane, where prices surged 35.1 per cent. Business research firm BIS Shrapnel's Robert Mellor said the figures were a last hurrah for Sydney and Melbourne, but prices in Brisbane - and to a lesser extent Perth and Adelaide - had yet to peak.

The Housing Industry Association said record low levels of first home buyers may have skewed the figures, as new buyers tended to buy at the bottom of the market.

Economists said the Reserve Bank was still likely to raise interest rates again this year.

"With the anecdotes coming through that there is more softness in housing... they can probably sit tight for the next few months," TD Securities chief economist Stephen Koukoulas said.

Labor treasury spokesman Simon Crean said families were already paying record shares of their income on mortgage repayments.

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