http://www.smh.com.au/news/National...icts-rate-fears/2005/02/08/1107625211082.html
Auction plunge contradicts rate fears
By John Garnaut
February 9, 2005
Sydney's housing auction market over the holiday period may have been the weakest recorded, challenging an upbeat appraisal of the economy used by the Reserve Bank to justify an imminent lift in interest rates.
The median price of houses sold at auction fell by 14 per cent, to $760,000, from November to December-January according to CPM Research, with only half of auctions leading to a sale.
The clearance rate was as low as 41 per cent counting properties withdrawn before auction.
"One in five properties were withdrawn - it's actually quite shocking," said John Wakefield, managing director at CPM.
Mr Wakefield said the market would not move unless demand increased - unlikely in view of expected interest rate rises - or prices fell. He predicted price falls this year of between 10 and 15 per cent.
On Monday the Reserve Bank set a course for interest rate rises in coming months. Its quarterly statement on monetary policy said the economy had recently strengthened on most measures.
It pointed to signs that house prices had either levelled off or were rising again, and surveys showing strong business conditions. It downplayed weaknesses in exports, retail spending and building approvals - all of which fell over the second half of last year.
Yesterday the leading business survey, by the National Australia Bank, showed business conditions plunged to 4 index points in January, down from 17 in December and 20 in November. Businesses recorded a sharp drop in new orders, profitability and exports.
"Would [the Reserve] say the same thing again as strongly, given what they've seen in the last couple of days? Maybe not," said Alan Oster, chief economist at the NAB.
But the NAB's important wage cost measure clicked up to 4.8 per cent for the year - the highest since the monthly survey began in 1997. Household wealth has continued to climb, despite soft real estate prices in most capital cities.
The Reserve Bank said the value of household assets rose 6.4 per cent in the first nine months of 2004 to $4.3 trillion, or $215,000 for each person.
Housing wealth rose 4.1 per cent to $2.6 trillion, while financial assets, such as shares and superannuation, were up 12 per cent to $1.5 trillion.
Mr Oster believed house prices had picked up "just a touch" since the October election.
But businesses and policy makers are hamstrung by the lack of a timely and definitive house price measure.
Residex said yesterday that Sydney house prices fell by 0.2 per cent in the December quarter and 2.3 per cent for the year. Australian Property Monitors' figures for the same periods were 5.4 per cent and 9.9 per cent, while the Commonwealth Bank found falls of 0.8 per cent and 15.7 per cent.
The Australian Bureau of Statistics said Sydney house prices rose 5.4 per cent in the year to September. December figures will not be released until March 3.
The bureau aims to begin a preliminary price series based on home loan records from banks and other lenders, starting with March quarter results in April.
"We're trying to get a preliminary indication of what the house price index is likely to show," said Paul McCarthy, head of the bureau's prices branch.
On Parliament's first day back this year, the Treasurer, Peter Costello, said the Reserve Bank's warnings on inflation and interest rates highlighted the need for Labor to support the Government's industrial relations program. "Australia needs another round of vigorous, real industrial relations reform," he said.
Auction plunge contradicts rate fears
By John Garnaut
February 9, 2005
Sydney's housing auction market over the holiday period may have been the weakest recorded, challenging an upbeat appraisal of the economy used by the Reserve Bank to justify an imminent lift in interest rates.
The median price of houses sold at auction fell by 14 per cent, to $760,000, from November to December-January according to CPM Research, with only half of auctions leading to a sale.
The clearance rate was as low as 41 per cent counting properties withdrawn before auction.
"One in five properties were withdrawn - it's actually quite shocking," said John Wakefield, managing director at CPM.
Mr Wakefield said the market would not move unless demand increased - unlikely in view of expected interest rate rises - or prices fell. He predicted price falls this year of between 10 and 15 per cent.
On Monday the Reserve Bank set a course for interest rate rises in coming months. Its quarterly statement on monetary policy said the economy had recently strengthened on most measures.
It pointed to signs that house prices had either levelled off or were rising again, and surveys showing strong business conditions. It downplayed weaknesses in exports, retail spending and building approvals - all of which fell over the second half of last year.
Yesterday the leading business survey, by the National Australia Bank, showed business conditions plunged to 4 index points in January, down from 17 in December and 20 in November. Businesses recorded a sharp drop in new orders, profitability and exports.
"Would [the Reserve] say the same thing again as strongly, given what they've seen in the last couple of days? Maybe not," said Alan Oster, chief economist at the NAB.
But the NAB's important wage cost measure clicked up to 4.8 per cent for the year - the highest since the monthly survey began in 1997. Household wealth has continued to climb, despite soft real estate prices in most capital cities.
The Reserve Bank said the value of household assets rose 6.4 per cent in the first nine months of 2004 to $4.3 trillion, or $215,000 for each person.
Housing wealth rose 4.1 per cent to $2.6 trillion, while financial assets, such as shares and superannuation, were up 12 per cent to $1.5 trillion.
Mr Oster believed house prices had picked up "just a touch" since the October election.
But businesses and policy makers are hamstrung by the lack of a timely and definitive house price measure.
Residex said yesterday that Sydney house prices fell by 0.2 per cent in the December quarter and 2.3 per cent for the year. Australian Property Monitors' figures for the same periods were 5.4 per cent and 9.9 per cent, while the Commonwealth Bank found falls of 0.8 per cent and 15.7 per cent.
The Australian Bureau of Statistics said Sydney house prices rose 5.4 per cent in the year to September. December figures will not be released until March 3.
The bureau aims to begin a preliminary price series based on home loan records from banks and other lenders, starting with March quarter results in April.
"We're trying to get a preliminary indication of what the house price index is likely to show," said Paul McCarthy, head of the bureau's prices branch.
On Parliament's first day back this year, the Treasurer, Peter Costello, said the Reserve Bank's warnings on inflation and interest rates highlighted the need for Labor to support the Government's industrial relations program. "Australia needs another round of vigorous, real industrial relations reform," he said.
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