Borrowers are anticipating yet another rate cut when the RBA meets next week, echoing the sentiments of most economists.

A Loan Market survey has found two-thirds of respondents believe the Reserve will once again take the knife to rates when it meets on February 7. Thirty-nine per cent are forecasting another 25bp cut, while 27% expect a deeper 50bp cut. Loan Market COO Dean Rushton said still more needs to be done to stimulate the economy following the RBA's successive rate cuts at the end of last year.

"The RBA lowering rates in November and December last year was an appropriate course of action which was a welcome relief for borrowers and struggling sectors such as retail, but there are no signs of an improvement in the current global economic environment, particularly the volatile situation in Europe. While the fundamentals of the Australian economy remain quite strong and consumer sentiment has improved, sections of the economy can benefit from the stimulus provided by more interest rate cuts," Rushton said.

The question remains, however, whether an RBA cut would see immediate benefits for consumers. NAB chief executive Cameron Clyne has added to the chorus of bankers flagging bank inaction following the next RBA cut, telling radio station 3AW there was "no correlation" between the RBA cash rate and the bank's cost of funds.

by ADAM SMITH - AUSTRALIAN BROKER NEWS

Demand for rental properties has pushed rents higher once again, new data has revealed.

According to the latest statistics from Australian Property Monitors, house and unit rentals have resumed upward growth after flat results over the previous two quarters.

National median weekly asking rents for houses rose by 1.1 per cent in the December quarter, with rents for units rising by 1.4 per cent.

Most capital cities recorded house rental rises over the quarter with Canberra up by 6.4 per cent, Brisbane up 2.7 per cent, Perth up 2.6, Adelaide up 1.5 per cent and Sydney up 1.0 per cent.

Melbourne, Darwin and Hobart however recorded flat results with no increases in median asking weekly house rentals over the December quarter.

Speaking about the results, Australian Property Monitors senior economist Andrew Wilson said the Sydney, Perth and Canberra rental markets have been characterised by chronically low vacancy rates and, with ongoing low levels of new construction, this situation is expected to continue with upward pressure on rentals.

"The Brisbane rental market also remains highly competitive for tenants reflecting ongoing consequences of the devastating floods of early 2011 and the slow progress of reconstruction," he said.

"Melbourne continues to be Australia's most tenant-friendly rental market with a wider choice of properties courtesy of nation-leading dwelling construction and no growth in rentals for both units and houses over the December quarter.

"By contrast house rentals in Canberra rose by 6.4 per cent over the year with Perth up by 5.3 per cent, Sydney up 4.2 per cent and Brisbane up by 2.7 per cent."

But while rental demand was high in Sydney, Canberra, Perth and Brisbane last quarter, Mr Wilson said he expected demand and price growth to peak in 2012.

"Peaking housing affordability as the price cycle bottoms out, combined with a strengthening economy will facilitate increased buyer activity in Sydney, Perth, Brisbane, Canberra and Darwin through 2012 that will take some pressure off the rental markets in these capitals," he said.  THE ADVISER

Investors are expected to slowly return to the property market, one industry stakeholder has claimed.

Interest rate cuts and more affordable housing are likely to encourage investors to re-enter the property market according to Property Buyer Rich Harvey.

"We are starting to see investors make small moves, thanks to the latest rate cuts," he said.

"However, that said, we have only had two rate cuts and I don't think that will be enough to really drive the market. Back in the 1990s, we had cuts of 1 to 1.5 per cent, which moved the market quite dramatically.

"So while investors will come back into the market, they won't rush back in overnight."

THE ADVISER

First home buyers are expected to be the most active player in the Australian home finance market during 2012, a national survey has found.

According to a recent poll by Loan Market Group, 36 per cent of brokers expect first home buyers to dominate the housing finance market this year.

Of the 252 respondents, 33 per cent said investors would be the dominant market segment, while 30 per cent said it would be refinancers.

“Our brokers are divided on which consumer group will dominate in 2012 but the majority think first home buyers will be the most active,” Loan Market chief operating officer Dean Rushton said.

Mr Rushton said first home buyers were the consumer group to re-emerge from hibernation during 2011, spurred on by the Reserve Bank of Australia lowering the official cash rate twice during the final quarter of the year.

“2011 was a savings year for many potential home owners and with the likelihood of further interest rate reductions and softened property prices, 2012 appears to be primed for first home buyers to enter the market,” he said.

Mr Rushton said investors were another growing market force and there was evidence last year of first home buyers also targeting investment properties as their entry point to the property market.

“Refinancing activity is also set to continue in 2012 with borrowers having a greater capacity to switch lenders and secure a better deal,” he said.

“There can be as much as a percentage point difference between the variable home mortgage rates currently on offer and people are starting to realise it’s worth shopping around.”

The Adviser

The Darwin property market is preparing for another boom as offshore gas projects gather steam and lift investment confidence.

Analysts believe the Icthys project will send the Darwin property market into overdrive after the city's median house price dropped 3.7 per cent in the year to November.

In fact, the top end is already starting to make a comeback, with research from RP Data showing home values in the capital city grew 0.3 per cent in the three months to November 2011, taking the median dwelling price to $456,000.

According to RP Data's research director Tim Lawless, Darwin remains one of the more resilient capital cities and he doesn't expect this to change in 2012.

"Housing market conditions are starting to show some green shoots now, at least at a macro level."

THE ADVISER

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

First home buyers have come out of hibernation to dominate housing finance enquiries, new research has revealed.

According to Loan Market Group, enquiries from first time buyers have hit their highest level in two years – representing 51 per cent of total enquiries.

Loan Market chief operating officer Dean Rushton said enquiries from first home buyers to the brokerage during October were strong in every state and territory.

Tasmania had the highest number of enquiries with 71 per cent followed by Queensland on 54 per cent, Victoria 53 per cent, the Australian Capital Territory 50 per cent, South Australia 48 per cent, Western Australia 44 per cent and the Northern Territory 41 per cent.

“After a few years of hibernation, first home buyers are back and are now the dominant section of the market for enquiry,” Mr Rushton said.

“A more favourable interest rate climate, helped by the latest RBA rate cut, is one reason first home buyers have re-emerged.”

Mr Rushton said the end of stamp duty concessions for first home buyers in New South Wales from the end of 2011 are boosting activity in that state.

“The softer real estate market is another encouragement for first time buyers if they are in a position to be active in the market,” he said.

Staff Reporter - THE ADVISER

For the second consecutive year, the Reserve Bank of Australia has managed to upstage the race that stops a nation – Melbourne Cup.

At its November Board meeting this afternoon, the Reserve bank decided to cut 25 basis points from the official cash rate, taking the new rate to just 4.5 per cent.

The announcement failed to shock industry pundits, with many economists predicting a November rate cut.

Last week’s benign inflationary growth provided the RBA with the right impetus to cut rates, according to RP Data’s national research director Tim Lawless.

“The rate cut should not come as a surprise from a housing market perspective, considering the soft market conditions that have been evident since June last year have created no inflationary pressures,” he said.

“In fact, capital city home values are down 3.6 per cent from their December 2010 peak and rental rates have increased by just 4.5 per cent over the 12 months to September.