House prices rise again but may ease soon

By Stuart Fagg, ninemsn Money

Australian house prices rose by 4.2 percent in the last quarter but some economists booming values will ease soon.

The Australian house price index rose 4.2 per cent in the September quarter, the Australian Bureau of Statistics said today, compared with an unrevised 4.2 per cent in the June quarter.

As a result, house prices are now 2.6 percent above their previous highs, achieved in 2008, according to Westpac economists.

The median market forecast was for the house price index to have risen 3.4 per cent in the September quarter and to have risen 4.8 per cent in the year to June 30.

However, some economists believe the gains seen this year could be short-lived.

"Australian house prices have rebounded strongly this year, buoyed by low interest rates, tightening fundamentals, the first home buyer boost and vastly improved market sentiment," said Paul Braddick, head of property and financial systems analysis ay ANZ.

"A shortage of supply (for sale) has boosted prices, but with confidence steadily returning to the market, supply is expected to recover. Along with the removal of the (Commonwealth) first home buyer boost, rising interest rates and deteriorating housing affordability, this should see house prices decelerate into 2010."

The ABS data is the latest to show a tentative boom in house prices this year.

Last week, Australian Property Monitors data showed that house prices rose by 3.7 percent in the three months to September alone and have already gained by 7.1 percent this year.

Melbourne and Hobart saw the biggest growth in house prices in the last three months, with prices rising by 6.1 percent and 5.4 percent respectively, while Darwin saw the biggest rise in apartment prices, up 11.9 percent.

APM economist Matthew Bell said the gains had been powered by a recovery in sales at the luxury end of the market and by owners who sold property to the rush of new first home buyers, who are now upgrading.

Meanwhile, a seperate report from QBE Mortgage Insurance found that low interest rates and a shortage of affordable housing, coupled with growth in rental rates, will continue to drive up house prices by 23 percent in the next three years.

with AAP