Australian house prices plunged by the most on record in 2011 as global economic uncertainty and concerns about its impact at home kept a lid on demand.
An index measuring the weighted average of prices for established houses in eight major cities slid 4.8 per cent from a year earlier, according to the Australian Bureau of Statistics, the biggest calendar-year drop since the data began in March 2002.
They fell 1 per cent in the three months to December from the previous quarter, when they retreated a revised 1.9 per cent. Economists had predicted a 0.6 per cent quarterly fall.
“Much of the price moderation of late is occurring at the top end,” said JPMorgan chief economist Stephen Walters, who forecast a 1.2 per cent drop. “The monthly data suggest the housing market received a small tailwind from the RBA’s November and December rate cuts. We expect prices to track close to flat over 2012.”
The Reserve Bank lowered the benchmark rate by a quarter percentage point on November 1 and again on December 6 as inflation pressures eased and global growth risks increased.
Australia recorded its worst annual job growth in 19 years in 2011, as consumers boosted savings, and traders are pricing in a 60 percent chance of another cut next week.
Sales of new homes fell a seasonally adjusted 4.9 per cent in December, with detached house sales dropping 7.7 per cent, a separate report from the Housing Industry Association showed.
“The intensification of bad news regarding Europe, question marks over labor market prospects in Australia, and avoidable delay and uncertainty as to whether banks were going to pass on the Reserve Bank’s second rate cut conspired to drive a fall in new housing contracts,” HIA chief economist Harley Dale wrote in the report.
Prices fell 1.6 per cent in Melbourne and Adelaide from the third quarter, slid 1.3 per cent in Brisbane and dropped 1 per cent in Sydney, the statistics bureau report showed. Prices gained 0.5 per cent in Perth and 0.7 per cent in Canberra.
A survey of homeowners showed prices are expected to slide 0.4 per cent in the next year and climb 1.2 per cent by December 2013, according to the report released today from National Australia Bank.
“NAB believes these expectations may be a touch pessimistic,” Alan Oster, chief economist at the bank, wrote in the report. “A structural shortage of housing remains, commencements are still weak, interest rates are falling and the unemployment rate is still comparatively low.”
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