Home values

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The value of Australian homes has bounced back but how long will it last? Will the bubble burst or will prices keep going up?

A combination of low interest rates, the first home owners grant and population growth has helped boost home prices to record highs. House hunters honing in on hot property are sending sales through the roof.

In the last 12 months house sales in Perth have risen by nearly 60 per cent. Sydney, had the second biggest rise with sales up by the 38 per cent. The rest of the capital cities weren't far behind.

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RP Data national research director Tim Lawless: "In 2006 Perth was booming it quickly went into market - values fell by 20%. Now we are starting to see a resurgence in the resource sector which is very much linked with the Perth property market."

With the first home buyers booster grant ending today auctioneers have seen a mad rush on the market during the last three weekends.

Clearance records are being crushed - Melbourne, the auction capital, has sold more than 80 per cent of all homes. Almost a quarter of homes to go under the hammer in Sydney have sold and almost two thirds in Adelaide.

Real Estate Agent Tim Fletcher says there's plenty of demand for properties in the market at present.

"I really feel sorry for people who want to get into the market where you see auctions that are going $200,000 above what the vendor prepared to sell for - that's the frustration the buyer has. Its great for the seller - they are winning Tatts lotto almost every weekend," Fletcher said.

"If interest rates begin going up in November - as indicated by the RBA - Australia will be the first country in the world to lift rates during the global recession...However with our economy relatively strong it's expected to have little impact on the property boom."

"Values and prices are going up significantly more than you'll read in newspapers day to day and people need to be aware of that - we're seeing 20 to 30 percent increases in some cases."

Financial commentator Michale Pascoe believes population growth is driving up demand for housing.

"In the year to march 31, the latest available figures, our population grew by 2.1 percent, a record 439,100 extra people. 278,000 of those was net migration, now when the population is growing at this rate it's need to grow, we need more housing we need more infrastructure and that helps maintain the boom."

"Australia has really had the miracle economy of the world. We've managed to avoid a recession we've had a very mild slow down and now we're coming steaming out of it."

So when is a good time to buy?

"I think people should buy as soon as possible - that doens't mean you go out and rush and buy the first thing simply of the basis that prices are going to go up. People need to remember you'll never find your dream home there will be something you don't like about it," Fletcher said.

While the mortgage belt is leading the way in sales - properties at the top end of the market haven't quite recovered.

One Perth mansion on sale for $85 million dollars, with its very own guest house, boat house, private jetty and tennis court, eventually sold for $40 million.

RP Data natioanl research director Tim Lawless says demand in the middle-market may may taper off in the next six to 12 months.

"Over the next 6 months we're likely to see successive interest rate rises probably see some demand slacken off, partly due to the decrease in affordability but also partly due to first home buyer demand winding out of the marketplace."

While the first home owners booster grant helped stimulate the economy - some argue it also created one of the biggest false bubbles in property history.

"The home buyers' grant did a job in helping to stimulate the market at a time where consumers were very scared. That was important, but in terms of actually helping first home buyers, not really, it's helped push up the price of first homes," Pascoe said.

If you're looking to buy - here's the advice from the experts.

"Anywhere close to the CBD within a 10km to 15km radius from the CBD would be a good place to buy purely for investment purposes," Fletcher said.

"Make sure you build in buffer zone for interest rate rises because we're going to see consecutive interest rate rises coming up," Fletcher advises.