(Bloomberg) -- Australian house prices rose the most in almost seven years in March as the country’s housing boom accelerated.
Average home values in Australia’s eight state and territory capitals rose 12.9 percent in the 12 months through March, the fastest pace since May 2010, according to data from CoreLogic Inc. released Monday.
The boom is being led by Sydney, where average house values surged 18.9 percent in the past 12 months, the most since November 2002. Sydney home values climbed 5 percent in the first three months of the year.
Amid increasing concern that runaway price growth is stoking a housing bubble, Australia’s banking regulator last week further tightened lending restrictions. Under the curbs, home lenders will have to restrict interest-only loans -- which are typically favored by housing investors -- to 30 percent of total new residential mortgages. It is currently running close to 40 percent.
Together with recent increases in home lending rates, the restrictions may “contribute towards cooling some of the exuberance being seen in the largest capital city housing markets,” CoreLogic head of research Tim Lawless said.
Announcing the stricter lending curbs, the Australian Prudential Regulation Authority said the combination of high property prices, record household debt, slow wages growth and low interest rates is creating an “environment of heightened risk.”
Other officials have also voiced concerns about the housing market in recent weeks. Central bank Assistant Governor Michele Bullock said regulators are “prepared to do more if needed” and Australian Securities & Investments Commission Chairman Greg Medcraft said the property market is “bubbly.”
The property boom is being driven by record-low interest rates, buoyant investor demand and rapid population growth. The population of greater Sydney topped 5 million at the end of June, having added 1 million people in the past 16 years, half as long as it took to add the previous million, the Australian Bureau of Statistics said last week.