Property prices may have finally received a little boost from the RBA’s cuts to official interest rates, but most property experts are tipping more of the same from the market in 2012.

Official data released late last week by RP Data showed capital city home prices rose in November 2011 by 0.1%.

While dwelling prices were down 3.5% in the first 11 months to the year, the slight rise in November was the first increase in home prices since December 2010.

Regional markets were particularly strong, rising 0.3% in November, while units were also well performed, with values rising 0.5% compared with a 0.1% fall in house values.

Dwelling prices rose in Melbourne (up 0.2%), Perth (0.5%) and Canberra (0.4%), although Brisbane (-0.7%), Adelaide (-0.3%) and Darwin (-0.9%) saw slight falls. Prices were flat in Sydney.

CommSec economist Craig James says that while the increase in dwelling prices in November was nothing to write home about, “the small increase does signify that home prices are flattening or close to flattening”.

James says the fundamentals for the property market are strong.

“If you had been thinking about purchasing an investment property, now is the time to get your homework and paperwork in order. The job market is healthy, housing markets are considered to be under-supplied and rates have been cut twice in the space of two months. Certainly other asset markets don’t offer the same attraction as residential property.”

“But as always it is a case of researching your prospects as conditions differ significantly across the country.”

James expects RBA’s rate cuts in November and December will help lift demand and prices for housing.

“CommSec expects Australian property prices to grow around 5% in 2012, but as always there will be major deviations from city to city and across regional areas.”

But James’ assessment stands out as being particularly bullish. Most economist and analysts are expecting another very tough year for the market.

In his 2012 market outlook, RP Data analyst Cameron Kusher says that while the interest rate cuts will help boost sales activity, prices are unlikely to move.

“Overall, we anticipate that the soft conditions are likely to persist, however conditions will be better than those in 2011. We forecast that growth will be limited with values potentially falling further in certain areas.”

“In those areas where values do increase they are likely to grow at a rate below inflation.”

Kusher nominates Melbourne, Adelaide and Hobart as the weakest capital city markets but says Sydney, Brisbane, Perth and Canberra will perform better, although growth if any will be limited.

Kusher’s low-to-no growth scenario is supported by ANZ (which says financial market volatility will “push house prices sideways to lower over the next six to 12 months in most capital cities”) and Queensland veteran Michael Matuisk.

He expects a long period where the market will essentially move sideways.

“We look to some improvement in nominal terms, but in real terms, expect a period of flat growth. Improvement should follow, within a small positive band of 2% to 4% per year over the next several years.”

This article was first published on smartcompany.com.au

Peter Fray

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