Australia house-price inflation accelerates in Q2

House-price inflation accelerated at a faster pace than expected last quarter, with record-low interest rates continuing to drive demand for property, particularly in the main centres. Demand for housing has risen sharply in Australia over the last few years, with low interest rates making housing more affordable to many.

Australia's House Price Index (HPI) surged 4.7% in the April-June months, the fastest pace since the March-2010 quarter, and up from a 1.6% rise in the March quarter. Analysts expected the index to rise 2.5% last quarter.

The index was up 9.8% year-on-year last quarter, according to the Australian Bureau of Statistics (ABS) with Sydney prices up 18.9% and Melbourne prices rising 7.8%.

The Reserve Bank of Australia (RBA) last cut the cash rate in May, to a record low 2.0%, but has since adopted a more neutral stance.

The central bank has said for some time now that it is monitoring the risks associated with the housing market. Some economists are concerned that once demand for housing tapers off there could be a sharp correction in house price, which could cause financial instability.

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