House prices in biggest rise since ’80s boom and bust

Australian house prices have soared by 15.5 per cent in the past year, according to the Bureau of Statistics house price index for the December quarter. Established home prices rose by 20.6 per cent in Melbourne and 17.2 per cent in Sydney.

During the same time buyers have been more active, lured by the most affordable home loans in two years, according to the REIA Home Loan Affordability report. While the average mortgage rose by 20 per cent, monthly loan repayments dropped 1.1 per cent in the December quarter.

National account figures also show an increase in household spending, with a jump in consumption by 4.2 per cent, while earnings only rose 2.3 per cent over the past year.
Analysts predict that house price rises will ease later this year, with the First Home Buyer's Grant reducing to $7,000 in July and the Reserve Bank signalling there will be no more interest rate cuts.