The ABS House Price Indexes 8 Capital Cities Dec 2012 6416.0 was released this morning and shows prices rising 2.1 per cent for the year and 1.6 per cent for the quarter.

This result will encourage those who see expensive land as a badge of honor.

It provides no respite for Australia’s 1.1 million negatively geared ‘little landlords’ who need at least 6 per cent price growth to break even.

The year saw the Reserve Bank cut interest rates by 175 basis points to delay the bursting of The Great Australian Land Bubble. They succeeded.

In more normal times – whatever they are – big interest rate cuts are a powerful stimulus to housing demand.  They change the affordability arithmetic. A wave of first homebuyers, eager to begin, make the biggest single commitment of their lives.  They liberate second homebuyers to trade up and the market lives.

Property prices have been trending down in real terms for two and a half years. Trends do buck around and partial reversals are to be expected.  A single data point does not fully describe a market as large and complex as Australia’s land market.

This very modest rally should be seen in the context of:

I see no government policy initiatives to correct these highly unusual economic settings.  Clearly they expect a market resolution.  The market will deliver one.

Don’t Buy Now!