According to figures released by Australian Property Monitors (APM), house prices in Australia increased nationally by +3.7% during the third quarter of 2009.

National house prices increased by +7.1% in the 12 months since September 2008 with Melbourne, Hobart and Darwin leading the way at +11.4%, +11.2% and +10.5% respectively, whilst Perth and Brisbane saw the lowest increases of just +1.7% and +2.1%.

Matthew Bell, APM economist, said: “The national housing market has continued to boom in the last three months, following a very strong June quarter, with quarterly house price growth at +3.7% - the highest rate in six years.

“Another quarter of improving employment results and share market increases of 20%, has meant that buyers are stepping into the oversold top end of the market to purchase properties at prices still below their highs in late 2007.”

The report stated that mortgage brokers had reported increases in enquiries from property investors, and according to the ABS, housing finance for investment purposes rose nearly +8% in August, and as a result investors are expected to return to the market in greater numbers in late 2009 and early 2010. However, investor enthusiasm may be tested if mortgage rates rise significantly as money markets have predicted, but strong rental yields and the prospect of future capital gains will entice many to enter the market.

Bell said: “While the explosive growth seen in the upper end of the market is expected to slow as prices reach and exceed their highs of 2007, moderate to strong growth is expected across the whole market for the remainder of 2009 and 2010. The question as to whether this growth can be sustained throughout 2010 depends on how quickly mortgage rates rise in the next six months.”

House price growth has been underpinned by record population growth and a significant short fall in new housing supply. Job market conditions have been improving, and renewed expectations that the unemployment rate is unlikely to exceed 7% mean that rising interest rates are now likely to be the biggest risk to house prices.