Australian Annual House Prices Fall Record 6.9% Amid Recession

Australian house prices fell by a record amount in the three months through March as the nation’s first recession since 1991 and surging unemployment sapped demand for property.

An index measuring the weighted average of prices for established houses in the eight capital cities slumped 6.7 percent from a year earlier, after dropping a revised 3.9 percent in the fourth quarter, the Australian Bureau of Statistics said in Sydney today. The drop was the biggest decline since the series began in 1986.

To prevent Australia’s property market suffering a U.S.- style slump as the nation enters its first recession in two decades, central bank Governor Glenn Stevens cut borrowing last month to a 49-year low of 3 percent. Demand for homes is also being boosted by government grants to first-time buyers of as much as A$21,000 ($15,400).

“Property prices are going to be held back to a large extent by worries about job prospects,” Savanth Sebastian, an economist at Commonwealth Bank of Australia in Sydney, said ahead of today’s report.

Prices fell 2.2 percent from the fourth quarter, when they declined a revised 1.2. The median estimate of 15 economists surveyed by Bloomberg News was for no change. Economists forecast a 3.9 percent annual decrease.

Job Losses

Australia’s currency traded at 73.48 U.S. cents as of 11:34 a.m. in Sydney from 73.59 cents immediately before the report and 73.06 cents in New York on May 1.

Commonwealth Bank expects the unemployment rate will climb to 6.5 percent over the next year from 5.7 percent in March. The jobless rate probably rose to 5.9 percent last month, according to the median forecast of 19 economists surveyed by Bloomberg News. The employment report will be released on May 7.

Stevens and his board will keep the overnight cash rate target at 3 percent tomorrow to gauge whether a record 4.25 percentage points of rate cuts since early September and government spending will spur the economy out of a recession, according to 18 of 19 economists surveyed.