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Housing price rise prompts rates warning

AAP logoAAP 1/08/2016 Garry Shilson-Josling, Economist

Another solid rise in housing prices has put the focus onto the potential for the Reserve Bank to again bring the housing market to the boil.

Housing prices in Australia's capital cities rose by 0.8 per cent in July to be up by 6.1 per cent from a year before. It's the slowest annual growth rate since September 2013.

The figures by property market analysis firm CoreLogic were released on Monday, the eve of the Reserve Bank's monetary policy meeting .

CoreLogic's head of research Tim Lawless warns that with housing auction clearance rates already running at high levels, policymakers will be wary of lower interest rates creating renewed upward pressure on prices.

"The strong clearance rates, as well as the fact that dwelling values are continuing to move higher may make the RBA's decision to cut rates more difficult, despite the low inflation trend and high dollar," he said.

"If the cash rate does move lower on Tuesday and the cuts are passed on to mortgage rates, the housing market and lending standards are likely to be under even closer scrutiny as policymakers watch for signs of value growth reigniting."

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