Official new data showing the slowest rate of house price growth in three years shows the benefit of strong supply boosting competition in the market, according to the Property Council of Australia.

The Property Council's Chief of Policy and Housing Glenn Byres said the ABS data on house prices showed a 3.5 percent increase over 12 months and 1.5 percent increase for the quarter.

“We have had the strongest period of supply for close to a decade and that’s feeding into a moderation of house price growth,” Mr Byres said.

“It makes clear one thing above all else can work to tilt the balance back in favour of homebuyers – and that is a sustained performance in supply to meet demand.

“It also comes with a caveat as there are signals from other official data on approvals and construction that the peak has passed on new stock coming into the market.

“Without a contribution on the supply side over the long haul that meets the pace of growth in our cities, we will struggle to close the affordability gap.

“That is why we need a new deal between the Commonwealth, states and territories to bring a competition-style approach to fix housing markets and planning systems which act as a barrier to development.

“Meaningful policy reforms that deliver real improvements in housing supply will benefit homebuyers more than playing with negative gearing – which even its advocates say will only change prices by 0.49 percent.”

See also:

Property price growth lowest in three years

Property market forecast: Sydney in 2017

Treasury report shows foreign buyers not causing high property prices