The growth in the price of established houses slowed appreciably in the March quarter, but nowhere near as sharply as the market had been expecting.

According to Australian Bureau of Statistics figures, released this morning, preliminary estimates show the price index for established houses for the weighted average of the eight capital cities increased 1.1% in the March quarter 2008. That compares to a revised upwards 4.1% in the December quarter (it was originally estimated at 3.2%).

Seeing the market estimate was for a rise of 0.2%, and some analysts were going for no increase, the news comes as a bit of a surprise, especially when the sharp upward revision in the December figure is taken into account. That revision took the rise in the index in the year to March to boom-like 13.8%, unchanged from the 13.8% rate (revised up from 12.3%) in the December quarter, which will be some small comfort to nervous economists.

The news won’t force the Reserve Bank’s hand on interest rates at the monthly board meeting tomorrow, but it does show that the slowdown is not pulling everything down at once.

Building approvals fell sharply in March, according to figures last week, and the retail trade estimates for the same month showed a 0.5% rise when released on Friday. That was more than expected but economists blamed that on higher food price inflation. Economists had been tipping around 0.2%. But then the same economists overestimated the impact of the Reserve Bank’s interest rate tightenings in February and March, and the additional increases from the banks, on house prices.

Clearly there is a slowing, but getting to zero will be a bit more drawn out than thought.

According to the ABS the capital city indexes rose in Melbourne 4.1%, Brisbane 2.8%, Adelaide 2.1%, Canberra 1.0%, but fell in Sydney by 1.5%, Darwin 1.3%, Hobart 0.7% and Perth 0.6%.

The ABS said that in the year to March all capital city indexes rose: Melbourne surged 25.9%, Adelaide, 21.6%, Brisbane 20.8%, Canberra 14.4%, Hobart 8.2%, Sydney 7.1%, Darwin 4.9% and Perth 0.6%. Perth’s rise is a shadow of the 30%-plus figures we saw back in 2005-06.

Perhaps there’s a crunch coming this quarter as more rate rises bite from the banks, and consumer confidence remains low.

The Reserve Bank won’t move rates tomorrow; it will wait to see what the Rudd Government does in the Federal Budget tomorrow week.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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