Investors who shied away from residential property investment may be poised to return as interest rates drop and the share market remains volatile.
Some developers say inquiries from investors have perked up in the past two months, gaining momentum after last week's 1 percentage point rate cut.
However, most agree that it is too soon to know if inquiries will convert into sales.
As Denis Hickey, who heads Stockland's development division, cautiously put it: "There is more awareness and inquiries from investors.
"We are starting to see investors looking at property in pockets around the country."
Mr Hickey's observation is mirrored elsewhere as investors check out the economics of investing in residential property.
Developers say the environment is more conducive today than at any time in the past five years.
There is a convergence of factors: lower interest rates, rising rents, a shortage of rental properties and the collapse of the share market.
Rental vacancies have fallen below 2 per cent in capital cities, the lowest level in history.
Stephen Wilkinson, research officer with the Real Institute of Australia, said the average vacancy in capital cities was hovering around 1.7 per cent.
The industry says the gap between the cost of money and rental income has closed to about 1.5-2 per cent.
Mr Hickey said investors looked for capital growth or yields, but could live with higher yield in the absence of capital gains.
Mirvac managing director Nick Collishaw said share market volatility had moved some investors back to more traditional investments.
"Safe havens like residential real estate," Mr Collishaw said.
"Certainly in Sydney suburbs such as Rhodes (in the inner west) and Chatswood on the north shore, we think investors should be coming back."
Charles Griffin, general manager with Central Equity, a Melbourne-based apartment developer, said: "We have sold two thirds of our latest project."
The project, City Tempo, in central Melbourne, had 300 units, priced upwards of $200,000.
As Central Equity sold off the plan, Mr Griffins said buyers were predominantly investors, because owner-occupiers would not wait two years or more for the apartments to be completed.
Central Equity is building about 800 apartments, priced from $100,000 to $800,000, in Melbourne.
Investors had turned away from shares and cash investment, Mr Griffins said, and they saw value in residential investment, especially in Melbourne, which was seeing the strongest population growth in the country. "Melbourne attracts between 12,000-15,000 people each week," he said.
Nicholas Wolfe, Frasers Property Australia's chief operating officer, said the number of upmarket units sold in its apartment block in central Sydney, Lumiere Residences, had steadily risen from 14 in September to 15 in October and 17 so far this month.
But Harry Triguboff, Australia's largest unit developer, is yet to be convinced.
"They have not yet returned to the market," he said.
"Investors are trying to understand the market. They know that interest rates have fallen and rents are rising.
"We are selling 12 to 15 apartments a week. In good times, we sell twice the number."
Graeme Joyce, who runs Joyce Property Investment in Perth, has noticed a 30 per cent lift in sales in the past two months.
"Investors are coming back because of higher yields. The average return is at least 5 per cent a year," Mr Joyce said.
Cameron Kusher, author of Cash Flow Positive Property Report for research firm RP Data, said the survey had found that residential investment in more suburbs was becoming "more cash flow positive".
The best suburb was Forrest in Canberra, where investors in a median-priced unit ($490,000) would be cashflow positive by about $6000 a year.
Mr Cameron said that in another instance, residential investors in Dysart, a mining town in central Queensland, would be $7000-$7800 ahead of expenses.
Chris FitzGerald, acting national president of the Real Estate Institute of Australia, said investors were looking at more affordable areas where vacancies were high.
Housing Industry Association chief economist Harley Dale said those buying property as an investment in recent times had been people managing their own superannuation funds.
"If they believe the return of capital appreciation will pick up some time in the future, now is as good a time as any to start to invest," Mr Dale said.
In recent times, he said, some investors had put their money into commercial properties: "Non-residential investment as an investment is not looking as shiny as it was. The missing ingredient is capital appreciation.
"But people should be look at keeping the investment for five to 10 years. Property is not something that you turn around in a few months."
The reality is that residential property has always been a bedrock of investment.
According to ABS data, investor finance totalled $82 billion last year -- ahead of $77 billion in 2003 -- at the peak of off-the-plan frenzy in Sydney and Melbourne. In the first nine months this year, $52 billion has been lent to residential investors.
