Property investors will do well in 2012 on the back of the same tight vacancy rates and soaring rents they enjoyed in 2011, a research company has claimed.

“With regard to rents, 2011 has been a landlords’ market with rents nationwide recording rises of 4.6 per cent-plus, according to the Australian Bureau of Statistics (ABS),” managing director of SQM Research, Louis Christopher, said.

“Sydney has recorded the fastest [rising] rents while Melbourne has been at the other end of the spectrum with zero rental growth, and in some areas rental declines.

“I expect 2012 to be somewhat the same with possibly another five plus per cent increase,” he added.

Figures released recently by SQM Research revealed that residential vacancies rose slightly during the month of November, increasing by 0.1 per cent to 1.9 per cent. This brings the total number of vacancies for November to 48,244 nationally.

Canberra remains the nation’s tightest rental market, recording a vacancy rate of just 0.6 per cent for the month of November, with a total of 294 properties.

This was closely followed by Perth, where renters have to choose from just 1,208 properties, leading to a vacancy rate of 0.8 per cent.

At the other end of the spectrum was Melbourne, whose vacancies continued to increase from month-to-month, and are largely considered to be experiencing an over supply of property, SQM Research said.

The capital city recorded a vacancy rate of 3.4 per cent for the month of November, with a total of 12,367 vacancies.

“Melbourne’s high levels of sale stock also further confirm that the city is currently undergoing an oversupply issue,” SQM Research said in a monthly report.

“Coming off the building boom that occurred in 2009 and 2010, the city has many ‘newly completely’ and ‘currently being constructed’ dwellings, but unfortunately not enough demand to meet the high levels of stock available.”

“This problem is being intensified by a generally cautious consumer attitude towards residential property at the present moment. Many individuals are deciding to stay at home in order to keep costs at a minimum or save, and even those who are currently interested in purchasing homes are opting for less expensive alternatives and are choosing older dwellings verses brand new or off-the-plan residences,” the report concluded.

Hobart recorded the largest yearly growth of the capital cities, increasing by 0.9 per cent to 1.9 per cent in November 2011, when compared to same period of the previous year.

Darwin has recorded the most substantial yearly falls, decreasing by 0.9 per cent since the corresponding period of the previous year to record a vacancy rate of 1.3 per cent in November.

Sydney’s rental vacancy rate increased by 0.2 per cent month-on-month and year-on-year to 1.5 per cent in November.

Matthew Sullivan – The Adviser

The property market has been tipped for an upswing in the New Year on the back of stronger domestic economic performance.

Speaking to The Adviser, Australian Property Monitors senior economist Andrew Wilson said the property market should undergo a "modest recovery" in 2012, resulting in greater lending and borrowing activity.

"Our strong economy will help our property market enter a modest recovery," he said.

"OECD is reflecting 4 per cent growth over the year, which is above trend and very good especially when compared to other countries around the globe."

On the back of this strong growth, Mr Wilson said he expects Australians to start spending again.

"They will definitely think about spending. They have been saving like crazy for the past 18 months and they have, in some instances, forgotten how to spend. But, I think confidence will return and, as it does, so will spending habits."

"Moreover, the skills shortage in key areas will drive immigration, which will ultimately drive new buyers into the market – helping 2012 to become the year of recovery."

After a pessimistic year in most housing markets across the country, the outlook for 2012 is generally a return to growth, according to Australian Property Monitors' annual State of the Market Report.

Despite earlier signs of growth, a sustained spring revival in buyer activity failed to materialise.

In the quarter to October, national median house prices fell by 1.6 per cent and were down by 4.2 per cent over the year.

But, looking forward, the news isn't all bad.

Australian Property Monitors senior economist Andrew Wilson said 2012 will be a mixed bag when it comes to housing, with some capital cities set to revive strongly while others will remain flat.

Darwin, Perth and Brisbane have the best prospects for price growth, while Sydney and Canberra are also expected to achieve reasonable growth in the year.

Nationally speaking, Mr Wilson said property prices should grow somewhere between 3 and 5 per cent.

Meanwhile, Brisbane, Darwin and Perth are all expected to achieve growth between 5 and 10 per cent.

Melbourne and Adelaide on the other hand, are only expected to achieve growth of 3 per cent.

"Demand for housing will intensify in 2012, particularly in Sydney, Canberra and Perth, which will see housing markets reenergised albeit at different levels," Mr Wilson said.

"Australia's economic fundamentals are strong, and are well positioned to weather any downturn in international markets. This coupled with renewed buyer confidence, will be the key to driving prices growth in the New Year

THE ADVISER