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Australia Property Market Shows Recovery Signs

02/03/2013 | 08:45pm US/Eastern

SYDNEY--Australia's property market is showing signs of springing to life this year, with the number of houses listed for sale dropping in January, according to research tracking housing market trends nationally.

Total residential property listings across the country fell 1.9% in January from December, a report by SQM Research showed, an indication demand in the sector is starting to re-build. The report adds to a wave of recent data fanning talk of a recovery in the housing sector this year that would end years of weak activity, falling prices and weak construction.

Research by RP Data-Rismark last week showed that capital-city house prices rose 1.2% in January from December and 1.8% on year. A Housing Industry Association survey also published last week showed a 6.6% jump in new home sales in December.

"This is potentially a sign that more stock is beginning to be absorbed, and that the property sales market may be starting to pick up in certain localities, particularly Sydney and Darwin," SQM Research said about its survey.

The data boosts evidence that aggressive interest-rate cuts last year by the central bank are finally beginning to lift non-mining parts of the economy hardest hit by the cooling of a decade-long mining boom.

"There are a number of signals now the market is gaining some traction," said Louis Christopher, managing director of SQM Research. "I think the interest-rate cuts are now working and that a housing recovery is now occurring."

Still, a government report Monday showed that the number of home-building permits fell 4.4% in December from November, highlighting the need for caution in interpreting the latest surveys.

Annette Beacher, head of Asia-Pacific Research at TD Securities in Singapore said the fall in housing permits may be a short-term blip that distracts from the bigger picture of a housing rebound.

"Looking through the noise, the housing sector is actually slowly healing and without an accompanying pickup in household credit," she said.

The Reserve Bank of Australia, or RBA, holds its first policy meeting this year on Tuesday, with economists and markets pricing in a very low probability of a further immediate cut in interest rates.

The cash rate is at 3.0%, down from 4.75% in November 2011, at matching the low reached in the aftermath of the global financial crisis. The RBA delivered 50 basis points of those cuts in the fourth quarter.

"Low listings, and thus limited supply of housing, combined with rising demand on the back of recent RBA rate cuts are a recipe for rising house prices and that is exactly what we are seeing," said Paul Bloxham, chief economist at HSBC, Australia.

-Write to James Glynn at james.glynn@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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