Property prices to rise by 5 percent in 2011

Property prices are expected to register a five percent growth by late next year predicts industry experts.

The already tight rental market will contribute to the rising prices as well as first home buyers and investor demand. CommSec economist Savanth Sebastian attributes increasing rental demand and wages to rising property prices.He said demand would be subdued in the first half of 2011 before accelerating in the last two quarters.

"Given the interest rate hikes we've had, it's likely to be a period of consolidation,'' Sebastian told News.com "Later in 2011, rental growth will be a major driver in attracting investors.''

He adds that annual price growth will range from five and eight percent next year. He also predicts a one interest rate rise for April and two during the later part of next year. Resource-driven cities like Perth and Darwin would continue to maintain robust growth along with Sydney and Melbourne.

Economists are guessing that there will be two or three interest rate rises for 2011. BIS Shrapnel residential property project manager Angie Zigomanis added that only selected first home buyers are expected to return to the market early in the year and also cited that the national house price growth would be limited to 5 percent.

"I think the it'll be pretty soft next year,'' Zigomanis said."Given the recent November rate rise, people will still be cautious.'' Buyers will remain wary of purchases in general; returning only when resources projects finally push through next year.