House prices up 0.6% in May, Economic growth set to slow: Economy Roundup

New figures from Residex show housing prices continued to grow by 0.6% in May, but clearance rates have continued to fall as demand softens.

The 0.6% growth indicates a softening market, as it follows a 1.6% rise in April and a 1.2% ain in March. However, the three month growth rate is now at 3.5%, compared to 1.4% recorded during the first quarter of this year.

There were some price declines in capital cities, particularly in Adelaide where houses dropped 0.4% to $404,500, and in Perth where units fell 1.1% to $403,000, while Melbourne also recorded some cooling to an average price of $582,000.

Canberra prices are now at $516,000, with Sydney at $657,000, Darwin at $511,000, Brisbane at $468,000, Hobart at $373,500 and Perth at $489,000.

Westpac economist Matthew Hassan said in a statement there may indeed be “more slowing ahead”.

“Rate rises and sharply lower first home buyer demand have already impacted heavily on housing finance approvals, which are down 28% from their September high. Historically, swings in finance approvals have usually been a good gauge of demand and tend to impact with a lag of about six months.”

“Latest auction clearance rates suggest there has been a significant softening in market activity in May-June – Westpac’s estimates adjusting for regular seasonal fluctuations suggest clearance rates fell about 5-6ppts in May with partial data for the first two weeks of June pointing to an even sharper 10ppt fall in Melbourne.”

Other economic data from Westpac shows economic growth is set to moderate in the second half of 2010.

The Westpac-Melbourne Institute leading index of economic activity, which indicates the likely pace of activity three to nine months in the future, remained unchanged during April at 264.4 points. The annualised growth rate slowed to 7.6% from 8.8%, but is still above the long-term trend of 3%.

“This is the first slowing after ten consecutive months of sharp acceleration. The year to March saw the sharpest upturn in the Leading Index since the rebound coming out of the early eighties recession,” Hassan said in a statement.

Hassan said the data within the index shows the RBA is likely to keep rates unchanged on the 6 July meeting, and will instead opt to lift rates at the 3 August meeting.

New figures from the Australian Bureau of Statistics reveal the total number of dwelling units commenced during the March quarter rose by a seasonally adjusted 4.3%, following a 16.8% rise in the previous quarter.

The seasonally adjusted estimate for private sector house commencements dropped by 2.4%, while the estimate for new private sector residential buildings classed as “other” rose by 7.9%.

Shares higher afters solid Wall Street lead

The Australian sharemarket has opened higher today, following good leads on Wall Street where investors grew confident about Europe’s ability to pay back significant amounts of debt.

The benchmark S&P/ASX200 index was up 50.20 points or 1.11% to 4555.20 at 12.15 AEST, while the Australian dollar has continued its climb to US86.5c.

Commonwealth Bank shares were up 1.2% to $52.81, while NAB shares were up 0.6% to $25.04. Westpac shares rose 1% to $23.53 as ANZ gained 1% to $23.23.

Meanwhile, Sigma Pharmaceuticals has appointed Mark Hooper as managing director and chief executive, amidst reports of some problems in Aspen Pharmacare’s due diligence.

“This is excellent news for Sigma,” chairman John Stocker said. “We have recruited a chief executive officer who will hit the ground running, with a deep knowledge of the company and the industry.”

Hooper will begin his position in September 2010.

Qantas Airways has appointed Gareth Evans as the company’s chief financial officer, following the resignation of Colin Storrie a few months ago. Evans has since acted as the acting group executive finance.

“Gareth was appointed after a search process that considered a very strong internal and external field, and I would thank all those who we considered in that,” chief executive Alan Joyce said in a statement.

Reuters has reported the Australian unit of German construction giant Bilfinger Berger has said it expects to double the size of its services business within three years due to a combination of acquisitions and organic growth.

“In the next three to four years we don’t see the need to go overseas. We see the growth opportunities in Australia as significant enough,” Valemus chief executive Peter Brecht said.

Obama vows to make BP pay for spill

In the United States, president Barack Obama has made a televised address stating BP will take responsibility for the cleanup effort of its giant oil spill in the Gulf of Mexico.

“BP will pay for the impact this spill has had on the region,” Obama said. “Tomorrow, I will meet with the chairman of BP and inform him that he is to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company’s recklessness.”

Both Obama and vice president Joe Biden will meet with BP executive to discuss the bill.

“In order to ensure that all legitimate claims are paid out in a fair and timely manner, the account must and will be administered by an independent, third party,” he said.

“The millions of gallons of oil that have spilled into the Gulf of Mexico are more like an epidemic, one that we will be fighting for months and even years.”

On Wall Street, investors took a hit after the National Association of Home Builders said sentiment fell in June by the largest amount since the financial crisis due to the expiration of the homebuyer tax credit. However, the Dow Jones Industrial Average gained 213.88 points or 2.10% to 10,404.77.