Banks to control house prices down under

House prices in Australia will be constrained over the course of the coming year, as the Australian central bank takes charge of inflation worries.

In an attempt to cool the rapidly overheating real estate market, the bank put interest rates up in the country four times last year and they now stand at 4.75 per cent.

Despite these cooling tactics, the average price of a home in Sydney and Melbourne jumped up by 6.6 per cent and 8.4 per cent respectively over the past 12 months.

However, the latest figures from the Australian Bureau of Statistics are more promising with the body reporting that the Australian house price index only rose by 0.7 per cent in the December quarter.

The news is an indication that the cooling measures are starting to take hold of the Australian property market.

Macquarie economist Ben Dinte: "We expect house prices will continue to be constrained in the coming year because of the tightening bias exhibited by the RBA."

Indeed, that "tightening bias" is now weighing on house prices, said Mr Dinte.

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