Capital city rents are set to rise by 7 % this year and rose faster than inflation in 2010,

RP Data said rents in capital cities rose 4.2 % in the year to December.

"We expect rents to increase by around 7 % during 2011," RP Data analyst Cameron Kusher said, adding rents would rise most for inner city units and the more expensive housing markets on metropolitan outskirts.

“For the coming year we expect rental markets to tighten further and rental growth during 2011 will likely eclipse that of 2010,” Mr Kusher said

The rise in rent comes amid an expected rise in inflation and while home prices are expected to remain flat, if not fall.

This week ANZ Bank and National Australia Bank released separate reports suggesting house prices will weaken amid higher rates and worsening affordability.

That affordability crisis will leave many renters in capital cities - where the bulk of Australians live - with little choice but to pay more for a home.

Australian Bureau of Statistics data released yesterday showed housing costs rose 0.6 % in the December quarter, taking the annual rise to 5 %.

Over the three months to the end of 2010, RP Data said rental growth was unchanged nationally even as it rose 1.4 % in capital cities.

Over the past five years, capital city rents have risen 44.2 per cent, to a median weekly price of $375.

“Vacancy rates remain tight in the capital cities, first home buyers remain relatively inactive, interest rates are at higher levels and new supply coming on-line is quite constrained,” the report said.

The official cash rate, currently at 4.75 per cent, is tipped to rise, as the Reserve Bank readies for an outbreak of inflation that it fears will result from Australia's tight labour market and on-going demand from Asia for Australian commodities.

Source: Domain:  Chris Zappone  27 January, 2011

The Australian property market was the clear front runner in 2010 with demand supported by low unemployment and tight supply adding to the upward, according to a global property market report.

But there is likely to be a slowing sales and downward pressure on prices in 2011, according to the Global Real Estate Trends reports from Scotiabank that looked at the performance of the 12 most developed markets.

Australia was heading for a property bubble but consecutive interest rate increases by the Reserve Bank of Australia (RBA), totalling 175 basis points since October 2009, alongside the expiry of the enhanced First Home Owners Grant in January 2010, succeeded in cooling its red hot property market to some degree, the report says.

The market slowed towards the end of the year. Average inflation adjusted home prices in the third quarter of 2010 were up 9.4% year over year compared with a 15.9% year on year increase in the first three months of the year.

‘We anticipate a further slowing in sales and price appreciation in 2011. While Australia’s close trade ties with Asia and resource wealth will continue to underpin a solid pace of domestic activity, higher interest rates will worsen already strained affordability. The RBA has recently taken pause, but we expect the resumption of a gradual policy tightening path in 2011, with short-term rates rising an additional 75 basis points by the end of 2011,’ the report adds.

The latest national figures from Rismark RP Data house price index seem to back up this analysis. They show that nationally prices fell 0.3%. But some areas, such as Melbourne are still seeing rising prices, up 0.4%. Also apartments are performing better, up 0.6% in Melbourne compared with a national drop of 0.1%.

The market is weakest in Perth, where average prices have fallen by 4.9%, or almost $25,000, since May. Average apartment prices in Perth are down $44,000. Home buyers in Perth have seen no capital appreciation since August 2007. Prices are also very weak in Brisbane, having dropped 2.3%, or $11,000, since their peak in May, with a 0.5% fall in November. While prices in Sydney fell 0.24% and are now 0.76% below the peak.

Rismark managing director Christopher Joye said the likelihood of further rate rises in 2011 meant it was unlikely that home owners would see any capital appreciation, with small nominal price falls a chance. Financial markets expect three more 0.25 percentage point rate hikes this year.

While ANZ Bank economics spokesman Paul Braddick said the decision to raise interest rates again has led to weaker property prices. ‘While the November interest rate hike further deteriorated home purchase affordability, general household financial stability and underlying tightness in market fundamentals are continuing to support, albeit weak, annual growth in house prices,’ he said.

‘We believe these market foundations combined with a strong domestic economic outlook, falling unemployment and limited forced selling will effectively place a floor under house prices in 2011,’ he added.

source: Properrtywire.com

Australian Property continues to be popular with Investors say 2 new reports. CB Richard Ellis has revealed that Sydney is the 4th Most popular Location for global investors after London, Paris and New York.

It found that foreign investors accounted for 42% of al Australian purchases - including office, retail and industrial property in 3rdQtr 2010.

A HSBC study showed that 42% of Australian expats are sending significant amounts of investment back to Australia into Australian property.

Source:  Australian Broker - November 2011 

Australia's Reserve bank has raised rates by 0.25% today.

The Cash Rate is now at 4.75%

The last rate rise was in May 2010

It has been the 4th rise in 5 Years

Economists were surprised believeing rates would remain stable after subdues Inflation figures.

Australia has continued to experience strong growth as opposed to the UK and US which are still in substantial economic difficulty

There is a general belief now that rates will remain stable for the next couple of months at least.

2 November 2010