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Perth House Prices to Jump Again

07 October 2013

Perth house prices are tipped to rise in coming months despite analysts warning the Reserve Bank will have to consider more rate cuts next year to prop up the economy.

RP Data analysis suggests current sharp increases in prices in Sydney and Melbourne will be followed by further growth in Brisbane, Adelaide and Perth.

Figures this week showed house values in the nation's two biggest cities growing at an annual rate of more than 20 per cent.

Research analyst Cameron Kusher said Sydney and Melbourne traditionally led house prices, reacting more quickly to rate cuts and economic conditions than other capitals.

In 2001, Perth house prices barely moved, despite strong growth on the east coast. It was not until mid-2004 that Perth prices surged. Over the past 10 years Perth prices have risen 143 per cent compared with 80 per cent in Melbourne and Brisbane.

Mr Kusher said the strong growth in Sydney and Melbourne would ease but other capitals - including Perth - would continue growing.

The Reserve's 53-year equal-low interest rate is mainly driving housing prices.

Expectations of more rate cuts have been wound back because of market perceptions that the Reserve is worried about housing price bubbles, and early signs the overall economy is improving.

But Westpac chief economist Bill Evans, one of those who had believed the Reserve would cut rates next month, now thinks mortgage holders will get a further boost in February.

He said economic growth was still likely to be well below trend, putting pressure on jobs.

"By February, with the Australian dollar heading in the wrong direction, a clear need to lower both domestic and global growth forecasts, confidence waning and the surge in house prices looking contained, the Reserve Bank is likely to return to easing policy with two more cuts expected in February and May," Mr Evans said. << back to news articles