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Auction rates rise and housing prices are up

Auction rates are on the rise, prices are climbing, new homes are taking a bounce back and interest rates are low. Is this the best time to buy property?

Over the weekend, the number of houses for auction was modest but buyers were buying. According to the Real Estate Institute of Victoria, Melbourne’s clearance rate was 71%, which is up from 58% this time a year ago.

Many houses were going for well above their reserve, with the biggest winners being high-end apartments. Bidders were out in force and hurrying auctioneers to begin selling.

Woodards Director John Piccolo said that “All the fundamentals – low interest rates; stable employment and lack of quality stock – contribute to consumer confidence and that’s reflected in the pricing”.

This comes on the back of a moderate yet healthy HIA New Home Sales Report from Australia’s biggest builders for the month of May. Last week the report detailed that new homes increased 1.6% overall and showed Victorian, New South Wales and South Australian multi-unit sales grew at a rate of 5.7%.

According to HIA, Australia has experienced a modest growth in construction of residential homes in 2012/2013 and it will likely trend upwards into the financial year.

Many S&P/ASX 200 (ASX: XJO) (^AXJO) listed property stocks will be cheering on the news ever since the GFC took much of their share price that has yet to be recovered.

However, two stocks that have had a solid run in the past three years are Commonwealth Property Office Fund (ASX: CPA) and GPT Group (ASX: GPT). At current prices both pay stable dividends over 5% and are moderately valued.

Foolish takeaway

The RBA’s goal of lowering interest rates to stimulate investment in non-mining sectors seems to be having an effect on the market. Whether it is sustainable in the long term is another question. However, regardless of interest rates and housing prices, time has proved that buying good quality stocks is a sure way to beat the market and make a healthy return. If you don’t want to put large amounts of capital directly into the housing market, perhaps property stocks could be a viable alternative.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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