Australia's residential property markets beat all expectations with the latest RP Data-Riskmark Index results showing a spectacular 12.34% growth in prices during the 12 months ending September.

Despite gloomy talks about the negative impact of the US sub-prime crisis and the recent interest rate rises, demand for units remained strong, boosting prices by 13.7%, which was slightly ahead of house prices, which rose by 11.9%.

Adelaide staged a stunning performance with property prices increasing by 24.3% as investors snapped up affordable properties in the capital city. The ongoing resources boom and the recent defence expenditure also provided strong impetus for people to invest their money in the region.

Investors continued to flock to Brisbane, pushing prices up by 20%, Melbourne by 17.6% and Canberra by 14.9%. Sydney's recovery appeared to have taken hold with property prices climbing by 6.9%.

Tim Lawless, RP Data's director of property research, said that in terms of price growth, the most divided housing market appears to be Sydney. While the most affluent areas are experiencing strong growth, much of the remaining market is experiencing zero or in some cases negative growth.

"Competition for properties in Sydney's inner city, North Shore, and Northern and Southern Beaches will continue to produce excellent growth in these areas, barring a significant external economic event," Lawless said.
"By comparison, properties in Sydney's outer suburbs and Central Coast are likely to be stagnant or even fall due to considerable mortgage stress being experienced in these areas."

Canberra emerged as having the highest rental yield of all capital city apartments over the three months ending August, with 6.2%, while Darwin houses offered the best returns for houses.

Houses and units rental yields City Houses  

City Houses 
Aug 07 quarter

Aug 07 quarter

Sydney 4.06% 4.98%
Melbourne 3.75% 4.57%
Brisbane 4.32% 4.96%
Adelaide 4.35% 5.02%
Perth 3.39% 3.78%
Darwin 5.38% 5.86%
Canberra 5.14% 6.20%
National 4.05% 4.87%

Source: RP Data-Rismark  Hedonic Index Results