Aussie prices fall further than forecast

Australian house prices declined more than economists forecast in the three months through March. File photo / Thinkstock

Australian house prices declined more than economists forecast in the three months through March, the second drop in the past three quarters, as higher borrowing costs curbed demand.

An index measuring the weighted average of prices for established houses in eight major cities dropped 1.7 per cent last quarter from the previous three months, the Australian Bureau of Statistics said on Monday.

Reserve Bank of Australia Governor Glenn Stevens left the overnight cash rate target at 4.75 per cent in April, judging borrowing costs to be "a little above average levels" after seven increases from October 2009 to November last year. Data shows Australians are saving more even as energy and mining investments keep unemployment near 5 per cent.

Prices fell the most in Melbourne and Brisbane, which both dropped 2.5 per cent from the previous quarter, while Sydney declined 1.8 per cent. Prices advanced 0.5 per cent in Perth and Hobart house prices gained 0.4 per cent.

A jump in home prices was among reasons Stevens increased the benchmark rate by 175 basis points from October 2009. Stevens has said the central bank's management of the biggest mining boom in a century has been aided by households restraining spending. Savings as a share of disposable income climbed to 9.7 per cent from October through December.Bloomberg