Nila Sweeney

Primed for growth after years of flat prices and with the largest dwelling shortage in Australia, Sydney offers the best location for property investors this year, said Residex CEO John Edwards.

"Sydney has at last reverted to positive growth ... and it's presenting as if the worst has passed," he said.

After a previous downward trend, Residex data shows that both house and unit prices in Sydney had increased between February and March, at 0.91% and 1.07% respectively. Quarterly, house prices were up 0.78% in Sydney from January through March, and 2.93% for units.

But the positives in Sydney were still not enough to erase an overall picture of falling prices in Australia as a whole, according to Residex. For the quarter, house prices in Australia were down 0.84%, and units down 0.18%.

The national median "is being negatively affected by the very poor results that are now coming out of the previously booming resource states, with Brisbane and Perth showing losses of 1.89% and 3.95% respectively," said Edwards.

All other capitals showed positive quarterly growth for houses, led by Darwin at 3.05%. But Edwards said Sydney will be the best housing investment market this year.

"It will be further along in the correction phase and it presents as having the largest potential housing shortage," said Edwards.

But while first homebuyers have been a strong force in Sydney, Edwards advised investors stay away from properties that group tends to favour - for now.

"There is a risk that after June - when the government may wind back the grant - properties in this segment will move back to prices that were in place before the benefits came along," he said.

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