SYDNEY, Oct 21 (Reuters) - Australian house prices are heading for their strongest month of gains since mid-2017 as record low interest rates and looser lending rules stoke auction demand in Sydney and Melbourne.
The recovery is welcome news for the economy after a two-year downturn ate away at household wealth and confidence, undermining consumption and business earnings.
A sustained revival in prices could also prove a saviour for the construction sector which has seen a severe downturn in new home approvals, particularly for the once red-hot apartment sector.
Monday’s data from property consultant CoreLogic showed home prices across the capital cities rose 0.4% last week, from the previous week, and 1.2% in the month to Oct. 20.
Sydney saw prices rise 0.5% in the week and 1.7% for the month, while Melbourne gained 0.6% and 1.6% respectively.
Values in Sydney were still down 3.0% and Melbourne 2.1% on a year ago, but that was a world away from the double-digit annual declines suffered earlier this year.
The pick-up came amid strength in clearance rates at property auctions, a popular method of sale in Australia’s major cities, which are at their highest levels since early 2017.
More than 80% of the properties in Sydney that went to auction over the weekend were sold, highs typically associated with past price bubbles.
In all, there were 1,949 auctions across the major cities and 76% of those were successful.
“The spring selling season is in full swing and conditions look to be strong in the two major markets with withdrawal rates low in both,” Westpac senior economist Matthew Hassan said.
“Recent clearance rates are consistent with price gains running at over 1% a month – i.e. 3% a quarter and a double-digit annual pace.”
That would be a boon for consumer wealth and spending power given the housing stock in Australia is valued at a cool A$6.6 trillion ($4.52 trillion), or more than three times the country’s annual economic output (GDP).
The Reserve Bank of Australia (RBA) has cut interest rates three times this year to an all-time low of 0.75% as it strives to revive economic growth and push unemployment lower.
Markets are wagering it will ease at least once more to 0.5% , likely by March next year.
Just last week, RBA Deputy Governor Guy Debelle underlined the importance of the housing market for growth, noting the downturn in the sector had been a the largest single drag on the economy over the last couple of years. ($1 = 1.4596 Australian dollars) (Reporting by Wayne Cole; Editing by Stephen Coates)