House prices rise in Q4 2014, economist warns of overheating

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House values across Australia have risen in the fourth quarter of 2014, as the major states experienced acceleration thanks to the then-anticipated interest rate cuts.
 
On average, house prices increased by 1.9% in Q4 of last year from the preceding three months. Data from the Australian Bureau of Statistics said house prices increased 6.8% from the same quarter of 2013, the slowest pace of year-on-year growth since Q2 2013.
 
Sydney saw a 3.4% rise from Q3 to Q4, while Perth merely achieved a 0.3% gain. Darwin dropped by 0.6%.
 
The slowdown in economic growth late last year prompted analysts to predict a series of rate cuts this year, which eventually materialised after the Reserve Bank of Australia (RBA) cut the cash rate to a record low 2.25%.
 
"The risk of a housing bubble is increasing," said Paul Bloxham, chief economist at HSBC Australia. He also used to head the RBA’s department overseeing financial conditions.
 
Bloxham also warned that Sydney’s house values were particularly vulnerable to overheating and are more likely to crash whenever rates begin rising again.
 
"Growth in Sydney housing prices is currently running at an unsustainable pace," he added.
 
Meanwhile, the Australian Prudential Regulation Authority said last year that it would “boost supervision of investment lending”, including the amount of debt borrowers are exposing themselves to.
 

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