House prices surge by 20 percent in the past 12 months

Capital city house prices rose by 20 percent in the last 12 months to the end of March 2010 according to ABS.

The Australian Bureau of Statistics (ABS) said prices rose by 4.8 percent in the last three months with Sydney and Melbourne leading the way with rises of 5.3 and 6.7 percent respectively.

That takes annual growth to 20 percent in the 12 months to the end of March 2010.

Today’s figures increase the chances that the Reserve Bank of Australia will raise official interest rates again tomorrow.

The central bank has long been concerned about the impact of rising prices and the dangers of a property market bubble forming as demand continues to outstrip supply.

The ABS figures are the latest in a string of reports showing continued growth in house prices.

Housing analyst Australian Property Monitors (APM) said last week that prices of units and houses had risen by 16 percent in the last year pushing the average house price to $542,000.

Sydney has the highest average house price at $609,353 but Melbourne prices surged by 27 percent in the past 12 months. Darwin houses rose by 15.7 percent, while Canberra prices were up 13.9 percent.

Perth and Brisbane were the only two state capitals to register growth below 10 percent.

While house price growth slowed slightly in the first three months of this year, the national average price still rose by 3.1 percent and APM is tipping growth of 8-10 percent in the next 12 months.

The National Housing Supply Council (NHSC) said last week that the current gap between housing demand and supply has grown by 100,000 in the last 12 months and warns that Australian must build 300,000 new properties by 2014 to close the gap.

“There is a very, very substantial increase in population. It’s just simply unmatched on the production side of the housing market,” said Dr Donald Owen, NHSC chairman.

“It defies the laws of economics. It’s not what should be happening in any well-run marketplace, but it’s certainly what’s happening in Australia and we need to understand a whole lot better why.”