Capital city home prices have fallen by two per cent over the past year, led by big falls in Brisbane and Perth, on worries about rising interest rates and the state of the global economy.
RP Data-Rismark Hedonic’s latest home value index for capital cities fell by 0.2 per cent in June, the sixth straight monthly fall in capital city home values.
Over the year to the end of June, prices Brisbane and Perth slumped by 6.3 per cent and 4.7 per cent respectively.
Sydney managed to buck the trend to be the only capital city to see rises in home values, rising by a meagre 0.5 per cent over the year.
RP Data research director Tim Lawless said market conditions were being dampened by soft consumer confidence fuelled by interest rate speculation and global economic jitters.
“The higher than expected CPI (consumer price index) figures earlier this week are likely to reignite the interest rate debate which is not going to assist with an improvement in consumer sentiment,” he said.
The rate of decline in capital city home values has been moderating since January, however, when capital city values fell by 1.2 per cent, due to the natural disasters along the east coast of Australia, the report said.
Rismark economist Christopher Joye said he expected the Reserve Bank of Australia (RBA) to raise rates at least once or twice more, which may soften dwelling values further.
“This should open up attractive investment opportunities,” Mr Joye said.
“Higher rates means the rental market will tighten beyond its already firm levels, with vacancy rates near all-time lows.
“In turn, this will drive rents and yields even higher.”
The study was based on almost 150,000 home sales nationally over 2011.
On Tuesday, the RBA is due to meet for its monthly board meeting and cash rate decision.
The official cash rate has been at 4.75 per cent since November 2010.
ANZ and Citigroup economists expect the central bank to raise the cash rate by 25 basis points next week, while Westpac is tipping cuts later in the year and in early 2012.
AAP
