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Oz house prices drop amid high borrowing costs

Tuesday 5th August 2008

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House prices in Australia's eight state and territory capital cities fell for the first time in almost three years in the second quarter amid high home mortgage costs.

An index of the weighted average price for established houses in the capital cities fell 0.3% in the June quarter, the Australian Bureau of Statistics said in a report. Prices rose a revised 0.4% in the March quarter.

The figures add weight to comments by Reserve Bank of Australia Governor Glenn Stevens on July 16 that more-expensive credit will slow the economy enough to control inflation. The RBA will probably keep its cash target rate at a 12-year high of 7.25% at its review of monetary policy tomorrow, economists say.

House prices in Perth and Hobart led the decline in the second quarter, according to the statistics bureau, falling 2.4% and 2% respectively. Prices in Sydney, Australia's most-populous city, rose 0.3% and prices in Melbourne fell 0.3%.

The house prices report comes after figures last week showed home-building consents fell for a second month in June. Total dwelling permits fell a seasonally adjusted 0.7% in June, following a revised 7.2% tumble in May, the statistics bureau said.

By Jonathan Underhill



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