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SydneySydney’s home price gains may slow after rising 13 percent above their 2004 peak, according to real estate researcher RP Data.

Prices in Australia’s biggest city have risen an average 9.1 percent in the 12 months ended Aug. 31 to A$580,000 ($582,000) for houses and A$450,000 for apartments, according to a RP Data study prepared for St. George Bank Ltd. Prices are expected to stay at the current level through 2011, it said.

“The good news for first-home buyers is that average Sydney house prices are expected to stay relatively stable in the short term, so they shouldn’t feel rushed to jump into the market,” Justin Smirk, chief economist at St. George Bank, said in an e-mailed statement. “Affordability remains the key factor for property prices in Sydney,” which will help offset a shortage of properties and keep prices level, he said.

Sydney residential prices have underperformed the overall Australian market over the past 10 years, rising 6.4 percent annually, compared with 9.5 percent nationally. A growing population in New South Wales, the state where Sydney is located, and the property shortage will help drive prices higher over time, RP Data said.

Gains in home prices may also be capped after the Reserve Bank of Australia raised its benchmark interest rate by a quarter of a percentage point to 4.75 percent last week and said it welcomed a cooling in housing prices.

Home values across Australian capital cities rose 8 percent in the year ended Aug. 31 because of faster population growth and constrained supply in one of the few economies to skirt last year’s global recession. Organizations including Westpac Banking Corp., Commonwealth Bank of Australia and Fitch Ratings have said those factors, as well as a lack of speculative buying, will keep the market from collapsing.

St. George Bank is owned by Westpac, the nation’s second- biggest lender.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

Tags: economy, investment, news, prices, property, real estate, research

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