Home is where the heart is, so the saying goes, and for many Australians it is also where the wealth is.
Not only is our home usually the biggest financial asset we have but residential property is also one of the most popular and traditional forms of investment.
Total returns, from rental income and capital gains, regularly outperform other investment sectors, including the share market.
However, rental returns have yet to improve in Victoria, according to the latest statistics, despite a rental accommodation shortage.
One of the reasons for this is that demand from buyers has continued to push on prices.
During the past few years, higher rents have been offset by higher purchase prices, to keep yields low.
However, this stalemate now looks set to break as we switch into what's known as a "buyer's market".
Property investors could finally start to see higher returns as prices soften and rents increase.
BUYER'S MARKET
According to the latest report from property researcher RP Data, those surging house prices of 2007 are about to come to an end, with buyers -- not sellers -- dictating prices during the remainder of 2008.
While this might seem like bad news for those people wanting to sell their properties, it has to be remembered that in many suburbs and locations they have already had significant price growth during the past few years.
Expectations, or hope, of even further price rises are unlikely to be met and sellers are starting to accept that future price growth could be at a slower pace if, indeed, it doesn't fall back.
"Market conditions are different now. Properties are taking longer to sell and there is more movement on the asking price of properties in the market, as stock levels mount due to decreased levels of buyer activity," RP Data research director Tim Lawless said.
"I think we can safely say that the market is somewhat wary at the moment.
"Investment levels in the Australian real estate market have not fallen this low since the end of 2006," Mr Lawless said.
"With less market activity, potential buyers now have less competition. This means more time to research the market, select appropriate properties and negotiate on the purchase price.
"The other encouraging sign for investors is that rental returns are now showing the first signs of improvement," he said.
GROSS RETURNS
According to the latest research by RP Data, four of the seven capital cities have already shown an increase in gross investment returns (yields) from residential property in the year to March 2008.
However, Melbourne, Adelaide and Brisbane have yet to show yields higher than last year, although this too is expected to change.
Softer capital growth and continued strong rental demand is expected to see these markets follow the trend of higher rental yields.
"Buyers who have their finances in order should be rubbing their hands together at the opportunities that abound in the market today," Mr Lawless said.
About one third of the highest performing areas for rental yields are within the inner city metro area. However, the majority -- almost two thirds -- are in regional towns, particularly coastal and lifestyle locations, he said.
Within metropolitan areas, however, the best performing rental returns are in those outer suburbs that have transport corridors.
Melbourne property expert Jock Bing thinks buyers might still be better off waiting and watching, or choosing a market that is already showing rental yield growth.
"I'm not sure if the market has come back enough yet for some buyers to feel comfortable to jump in," Portfolio Management Services managing director Mr Bing said.
"I think some buyers are still a bit frightened.
"In Sydney prices are low and they haven't moved for about two years but at the same time rents have increased so there are some real opportunities there but I'm not sure if Melbourne is at that stage yet.
"I think we are heading that way but I wouldn't quite call it yet," Mr Bing said.
