Developers are finally offloading some of the oversupply that glutted housing markets earlier in the decade. "There is a greater tendency for people to buy newly constructed dwellings, which we think indicates that the excess stock is being absorbed. First homebuyers are not moving into the outer suburbs of the capital cities on home and land packages - they are instead choosing units and townhouses in middle ring suburbs," said Angie Zigomanis, senior analyst, residential property at BIS Shrapnel. And what's more, first homebuyers are tipped be a resurgent force in the market, and will be picking up some of the slack in the 'other dwellings' market - which includes units and townhouses - left there by fleeing investors. In terms of new housing starts, the good news in resources-rich Western Australia was not mirrored around the nation. While WA's total building activity jumped 12% in financial year 2005-06, the national average fell 3% over the same period. Moreover, the two recent interest rate rises will effectively stamp out the possibility of an early recovery in residential construction in the next two years, as activity has dropped as much as 50% in some states since 2002, including NSW. The usual culprits of land supply shortages and resulting high home and land packages have been cited for the ongoing lacklustre performance of new home construction, especially in cities such as Sydney where supply has been restricted. Prospects for a pick up in investor interest look slim at best for the next 12 months, as neither the carrots of capital gain or improved yields will be lucrative enough to lure investors back. Zigomanis predicts that rents would have to rise by at least 30% for yields to be sufficiently attractive to residential investors.

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker