The rate of increase in home prices is accelerating.  If it continues, don't expect a further cut in interest rates, count on an increase, later rather than soon.

RP Data shows capital city prices up 1.4% in March (annual 17%) and up to 2.7% year to date (annual 12%).  So, around 10% this year is a real possibility.

Historically, as prices pick up there is usually a year where the rise is between 15% and 20%.  This could recur because of current low rates, low unemployment, real wages registering solid gains, strong population growth, low supply and high demand, high rents, and low borrowing costs.  All these indicate a rise of 10% is quite likely.

Supporting these is the high level of auction clearance rates (around 70%), which is indicative of buoyant prices.  There is a long term correlation between improving shares prices (20% in the past year), financial well-being and rising house prices.  However, it is my opinion that share markets are over-priced and there will be a near term fall, but this factor alone won't kill off a better housing market.

House price gains should continue for some years, probably until the Reserve raises interest rates.  This may not occur to any great extent while the A$ stays high and inflation is officially low.

Unlike Treasury, the Reserve Bank is independent and so should not prevent the next house price boom, which seems to have started late in 2012.

The Roy Morgan Consumer Confidence Rating is now at 122 points, 11 higher than the same time last year, indicating that people are less worried about their personal finances.  The Business Confidence Rating is 124, the highest since April 2011, meaning businesses are cautiously optimistic about the economy.

A very Happy Easter to all!