SYDNEY (Reuters) - Australia’s housing market started the year with a bang as annual price growth accelerated to the fastest pace since late 2017, supporting consumer wealth and confidence in the face of damaging wildfires and the coronavirus scare.
Data from property consultant CoreLogic out on Monday showed home prices across the nation rose 0.9% in January, from December when they were up 1.1%.
That brought the gains for the 12 months to January to 4.1%, a world away from the punishing declines seen early last year.
The revival was led by the major cities with values in Sydney up by 1.1% in January and 7.9% for the year. Melbourne boasted gains of 1.2% and 8.2% respectively.
The bull market was also becoming more broad-based with every major city recording gains in January, while values in Brisbane, Adelaide, Hobart and Canberra hit all-time highs.
January is seasonally a slow period for home sales being the peak of the Australian summer holiday season. This year sentiment was also darkened by bushfires raging across the southeast of the continent.
The spread of the coronavirus has added a new headwind by badly hindering Chinese tourism to Australia.
As a result, analysts have trimmed forecasts for economic growth this quarter and markets have stepped up wagers of more interest rate cuts.
The Reserve Bank of Australia (RBA) holds its first meeting of the year on Tuesday and futures <0#YIB:> imply around a 20% chance of a quarter point cut in the 0.75% cash rate. [AU/INT]
An easing is now fully priced in by May, having been brought in from July given the latest news on the virus. Investors have even priced in a two-in-three risk of a further move to 0.25% by yearn end.
Rates were cut three times last year in an attempt to stimulate consumer spending, with only limited success.
Still, the rebound in home prices is a boon for wealth with Australia’s housing stock valued at a hefty A$6.9 trillion ($4.72 trillion).
“The lift in home prices has the potential to boost perceived wealth and thus boost consumer spending,” said Ryan Felsman, a senior economist at CommSec.
“Wealth is at record highs and incomes are still running faster than consumer prices. The missing ingredient is confidence.”
The surge in prices is also attracting more money into home building after more than a year of sharp declines.
Data from the Australian Bureau of Statistics out on Monday showed approvals to build new homes held steady in December, a surprisingly firm result after a steep jump the month before.
Maree Kilroy, an economist for BIS Oxford Economics, noted annual growth in approvals had turned positive for the first time in 18 months.
“The positive momentum that has developed in the established property market and the flow through of a range of stimulus measures to new dwelling demand sets the scene for a recovery in approvals over 2020,” she added.
The residential construction sector is a major employer and spills over into wider activity as homes are furnished.
Reporting by Wayne Cole; Editing by Sam Holmes