Canada's Housing Bubble

May 04, 2010 David Mclennan and Markus Mannheim canberratimes.com.au

Soaring house prices across Australia are likely to convince the Reserve Bank's board to raise interest rates again today.

The Bureau of Statistics' latest preliminary data shows house prices in Canberra rose 20.6 per cent in the year to March.

The price of ACT homes rose 5.4 per cent in the March quarter, faster than every capital city except Melbourne, where prices rose 6.7 per cent.

The median price of a Canberra house is about $555,000. The data covers established houses only, not units.

Most economists predict the Reserve will increase its cash rate today from 4.25 to 4.5 per cent. The futures market has also priced in a 25-basis-point rise.

The increase would cost a house owner with a $300,000 mortgage an extra $48 a month.

The average nationwide house price rise was 20 per cent in the year to March, the fastest annual growth since the bureau began the data series eight years ago.

TD Securities strategist Roland Randall said there was little chance Reserve board members would hold rates.

''The strength of domestic data, including consumer and asset price [housing] inflation, is undeniable. The RBA will want to get cash rates to its 'average' target as soon as possible.''

See also:  Rates rise for third straight month