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SYDNEY, Nov 1 (Reuters) - Australian home prices rose for a 10th straight month in October as record-low borrowing costs kept demand hot in Melbourne and Sydney, one reason why further cuts in official rates are considered unlikely in the near term.
The Reserve Bank of Australia (RBA) holds its monthly policy meeting on Tuesday and markets are pricing in a miniscule chance of an easing after cuts in August and May.
A Reuters poll of 60 economists found all but five expected rates to stay at 1.5 percent, in part because the policy makers have cited concerns about an overheating housing market. AU/INT
Tuesday's figures from property consultant CoreLogic underlined the need for caution. Its index of home prices for the combined capital cities rose another 0.5 percent in October, from September when it increased by 1.0 percent.
Annual growth in prices accelerated to 7.5 percent, from 7.1 percent in September, though that remained some way from last year's peak atop 11 percent.
Sydney and Melbourne remained the hot spots with annual growth at 10.6 percent and 9.1 percent respectively. Growth was more modest elsewhere, with prices actually falling in Perth and Darwin.
The inexorable rise of prices in the major cities has taken homes out of the reach of many first buyers and fuelled concerns about excessive borrowing by property investors.
"With ongoing strong value growth and high clearance rates in Sydney and Melbourne, as well debate around affordability gathering some momentum, there is likely to be further caution by the Reserve Bank around future rate cuts," said CoreLogic research director Tim Lawless.
One measure of the strength of demand was clearance rates at auctions which were tracking around the high 70 percent levels. Lawless noted that over September and October, weekly clearance levels in Sydney dropped under 80 percent only once.
Price growth for houses consistently outstripped that of apartments, likely reflecting the large supply of new units set to come on to the market in the next year or two.
That was particularly true for Brisbane where building approvals suggested the existing stock of units could expand by more than a quarter over the next two years, said Lawless.
The corresponding increases for Sydney and Melbourne were 13 percent and 16 percent respectively.