March 1, 2017 / 12:59 AM / 5 months ago

Australia home prices jump most in 6 yrs in Feb, ring policy alarms

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SYDNEY, March 1 (Reuters) - Home prices in Australia's major cities surged in February to take annual growth to the fastest in over six years, a headache for policy makers alarmed at the risks of a debt-fuelled bubble in the sector.

Property consultant CoreLogic said its index of home prices for the combined capital cities climbed 1.4 percent in February, from the previous month.

Annual growth in overall prices accelerated to 11.7 percent, surpassing the previous peak touched in 2015 and the fastest pace since mid-2010.

That will be a worry for the Reserve Bank of Australia (RBA) which had been hoping the market would cool after regulators slapped banks with tighter lending rules.

After cutting interest rates to a record low of 1.5 percent in August, the central bank has warned further easing would only encourage more borrowing by already heavily indebted households.

The CoreLogic data showed home prices in Sydney kept up their blistering run with a rise of 2.6 percent in February. The annual pace of growth spurted to a lofty 18.4 percent.

Melbourne saw a surge of 1.5 percent in the month, lifting annual growth to 13.1 percent.

"The annual growth rate across the combined capitals hasn’t been this strong since June 2010," said CoreLogic head of research Tim Lawless.

"In Sydney, it is the highest annual growth rate since December 2002 when the housing boom of the early 2000's started to slow."

Since January 2009, home values in Sydney have more than doubled while Melbourne has increased by 88 percent.

The inexorable price rise in the major cities has taken homes out of the reach of many first-time buyers and become a political hot potato.

The conservative government of Malcolm Turnbull has blamed a lack of supply for the problem, while the opposition Labor Party has pointed the finger at favourable tax treatment for property investment. (Reporting by Wayne Cole; Editing by Shri Navaratnam)

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