Australian house prices defy predictions, soar fastest in 7 years

Australian house prices have soared at the fastest pace in past seven years, according to a report released by financial services company CoreLogic on Tuesday. The demand for houses hiked because of low interest rates and so the prices also surged.

The house price rate kept growing until December. It jumped by a further 1.4 percent during the month. This resulted in 10.9 percent growth for the year 2016.

Sydney and Melbourne recorded the highest price surge. The prices in Sydney and Melbourne jumped by 97.5 percent and 83.5 percent respectively since January 2009. While the median house price in Sydney is at around $1 million at the moment, in Melbourne, it is at around $720,000. The price hike is a major issue of concern in long run.

Region-wise house price hike for 2016

• Sydney - 15.5 percent
• Melbourne - 13.7 percent
• Hobart - 11.2 percent
• Canberra – 9.3 percent
• Adelaide – 4.2 percent
• Brisbane – 3.6 percent
• Darwin – 0.9 percent

Weaker housing market conditions were recorded in regions associated with mining and resources. The house prices sank by 4.3 percent in Perth over the period.

According to CoreLogic researcher Cameron Kusher, such a surge in house prices was not expected. “When we got to midway through spring and we saw that there was no slow down it kind of became evident that we were going to end up with a stronger year this year.”

The banks were expecting the growth rate to slow down. On the contrary, the prices have risen dramatically. Kusher added that this may put pressure on the banks to pull back on lending in 2017. “Obviously the cash rate is still very low and the rest of the economy needs low interest rates but they don’t want to turn that into just more housing speculation, so I think we will see a lot more about this in 2017.”

Kusher also said that 2017 is expected to observe a decrease in the house prices in Australia but the chances of further growth cannot be ignored.