Housing costs show the largest quarterly rise in the September CPI

Its worthwhile having a closer peek at the ‘new look’ CPI figures just released by the ABS- particularly, how have the components of the housing category contributed to price rises.

The September quarter data was the first time the 16th series of CPI has been publicly released (the 15th series was phased out in June).  The new series provides a seasonal adjustment for those components of the Index that are affected by seasonal factors.  There are plenty of other changes (as outlined in our previous blog here) that have been made to the CPI methodology.  The new series should provide a more accurate measure of price movements.  The 16th series also includes two new sub-categories:  ‘New dwelling purchase by owner-occupiers’ (previously this was simply ‘house purchase’) and the less relevant ‘Household textiles’ category.

The headline inflation reading for the year ending September was up 3.5% (3.7% in June).  More importantly, the trimmed mean and weighted median recorded an annual change of 2.3% and 2.6% respectively which is right in the middle of the Reserve Bank’s comfort zone.  The lower than expected inflation data provides the strongest hint yet that interest rates are potentially on the way down.

As can be seen from the graph below there are a wide range of produce categories experiencing both significant price rises as well as price falls.  Fruit costs were up 66% over the year, followed distantly by automotive fuel which where prices had gained 14.1%.  At the other end of the spectrum was the dramatic fall of 20% in the Audio, visual and computing equipment category – great time to be buying a new TV or computer!

 

Looking specifically at the ‘housing’ category of the Consumer Price Index (which holds the largest weighting of all categories at 22.3%), prices were up 4.2% over the year.  Rather than ‘housing prices’ in the conventional sense of the term, it is primarily the utility items that are contributing to the largest increases across the category; electricity prices are up 12.5% (the fourth largest rise of any category over the year), water and sewerage are up 8.6% and gas/household fuel costs are up 6.0%. The purchase price for a new home is up just 1.8%, the lowest component within the housing category.  Rents are up 4.6% which approximately corresponds with our monthly rental data.

Looking forward, the soft inflation figure is good news for the housing market.  Interest rates are likely to be, at the very least, stable if not falling as early as Melbourne Cup day (most economists are suggesting rates will fall by 25-50 basis points on the first Tuesday of November).  We are likely to see further improvements in consumer confidence and business confidence readings on the back of the latest inflation figures, which in turn should spark some confidence back into the housing market.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

Connect with CoreLogic

Enter your email address to subscribe to our e-newsletter, and have new posts delivered via email. You can also connect with CoreLogic on social media.

2 Responses to Housing costs show the largest quarterly rise in the September CPI

  1. Randy Selzer November 24, 2011 at 3:01 am #

    Once again, Tim, great reading!…the situation here in Canada is similar, although house prices in the greater Toronto area surged nearly 10% percent this year…we have the same type of increases in gas/houehold fuel, food, etc….rents are pretty stable, with no appreciable increase lately…wish we had access to detailed statistics such as you provide……cheers from Canada

Trackbacks/Pingbacks

  1. Twitted by ZobelNRASSA - November 2, 2011

    […] This post was Twitted by ZobelNRASSA […]

Leave a Reply

Notify me of followup comments via e-mail. You can also subscribe without commenting.