Housing market continues surge

A rebound in Sydney housing starts has added more fuel to the economy, increasing expectations that interest rate rises are looming.

The housing recovery hit a new level in the December 2001 quarter, with Australian Bureau of Statistics' figures showing housing starts were up 12 per cent for the quarter and 57 per cent since last March. The latest surge was driven by New South Wales, the centre of the economy's slowdown in 2000-2001. NSW housing starts rose 74 per cent between March and December, overtaking Victoria for the first time in a year.

The ABS estimates that Sydney house prices jumped 5 per cent in the December quarter, and at an annual rate of 25 per cent in the second half of 2001.

HSBC economist Anthony Thompson says that stronger than expected housing starts imply even stronger building activity over the first half of 2002. But Wilhelm Hanisch of the Master Builders' Association says that December was probably the peak of the cycle.

The Housing Industry Association is forecasting a decline in housing starts from 150,000 in the year to June to 136,000 in 2002-2003. Victorian starts would fall from 44,000 to 40,000 in 2002-2003.