THE property market has bottomed out with national house prices recording their biggest quarterly increase since the end of the boom. Sydney house prices increased 1per cent, the biggest rise in more than two years, according to Australian Bureau of Statistics figures released yesterday.
AMP Capital Investors chief executive Shane Oliver said while property markets in Australia's eastern capital cities had bottomed out, low affordability and low rental yields would keep a lid on prices.
"We've seen the bottom of the market. What you'll see now is prices fluctuating but pretty much moving to the side for the next few years," Dr Oliver said.
"But Australian housing remains very overvalued, housing affordability remains poor - particularly in Sydney and Melbourne - and low rental yields will keep investors away for some time."
The market also remained "extraordinarily" susceptible to rises in interest rates.
Australian Property Monitors research director Louis Christopher said the market had been stimulated by the Reserve Bank's statement that a benign inflation outlook decreased the likelihood of an interest rate rise in the short term.
"But the moment we see any type of rate rise, even if it's just a quarter of a per cent, the Sydney house price falls of 2005 would be repeated," he said.
Last weekend 62.7per cent of auctioned properties were sold in Sydney, the highest clearance rate in two years, but still significantly lower than at the peak of the boom, according to Australian Property Monitors. This weekend 400 Sydney properties are listed for auction, more than double the 192 put under the hammer last weekend.
Likely to capitalise on the recent upturn are Con and Irene Douvis whose four-bedroom house in Clovelly, in Sydney's eastern suburbs, is due to be auctioned in two weeks.
Ms Douvis said the couple had been waiting for an improvement in buyer sentiment before listing the property.
"A year ago, reports were saying prices were going to go down and interest rates were going to go up, that was the hype at the time, but a year later it seems the opposite," she said.
Despite the property downturn, the couple expect to make a profit on the house they bought for $1.3million in 2003, anticipating a price of $1.7million.
Macquarie Bank head of property Rod Cornish confirmed the market was entering a "stabilisation phase".
"In this phase of the cycle you get a bit of volatility so there might be one or two quarters that we do get some falls," Mr Cornish said.
"But we're not going to see any large drops unless the Reserve Bank raises rates too far or taxation rates are changed."
House prices rose 2.1per cent nationally in the three months to December, the biggest quarterly rise since the December quarter of 2003.
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