Favourable economic conditions have led to a pick up in residential prices across most Australian capital cities, according to research released this week by mortgage insurer PMI Mortgage Insurance Ltd (PMI).
Findings from the annual PMI Residential Property Overview indicate that Melbourne, Brisbane, Adelaide, Hobart and Canberra experienced a rise in house price growth in 2006/07.
Although Perth and Darwin also witnessed significant increases in house prices up to 2005/06, growth eased considerably in 2006/07.
Sydney was the only capital city that had negative growth during the year, with the median house price declining marginally.
Although there were two interest rate rises in 2006/07 (on top of the previous 0.25 per cent rise in May 2006), all capitals apart from Sydney were able to achieve solid house price growth.
This underlines the strength of the economic conditions and employment opportunities during the year that have maintained positive sentiment, according to PMI.
CEO of PMI Australia, Ian Graham, commented that nationally, the number of first home buyers entering the residential market continued to increase over 2006/07, enticed by expanding first home buyer benefits.
"Investors have also returned to the market in greater numbers in 2006/07, as tight vacancy rates accelerated rental growth", Mr Graham said.
"Nevertheless, investor activity overall remains below previous peaks and performance."
Forecasting future trends, Rob Mellor, Managing Director of BIS Shrapnel, predicts that strong economic conditions in 2007/08 should help to support residential prices, and keep price growth solid in most capital city residential markets.
"The favourable economic conditions have created strong wage growth and record levels of net overseas migration, which should drive stronger underlying demand at the national level, while keeping unemployment at long term low levels", Mr Mellor concluded.
