Defying the sinking confidence of investors in late 2008, home values in many areas of the country are rising again in 2009.

National median dwelling values are up 1.1% over the first two months of this year, according to the RP Data-Rismark International Hedonic Property Value Index. Property investors can also take comfort in a median national rental yield for units at 5.35%, according to the latest monthly indices.

The recovery in prices over the last quarter has been driven by a more affordable situation overall for buyers, says Rismark International CEO Christopher Joye. He points to a 40% reduction in mortgage rates, the boost to the First Home Owner Grant, the government's fiscal stimulus and a significant housing shortage.
"The improvement in home values in 2009 following modest 3% falls in 2008 highlights the absurdity of the sensationalist predictions by one or two economists in 2008 that prices would fall by 30-40%," Joye said.

The indices show combined house and unit values are up from the previous quarter - by 6.1% in Darwin, by 1.9% in Melbourne and up 0.5% in Sydney.

Values were down for the quarter in the four other mainland capital cites - Brisbane by 2.2%, Adelaide by 1.3%, Perth by 1.0% and Canberra by 1.8%

Median values of dwellings don't only take the recent home-sale prices into account, but also include other properties in the assessment that were for sale or haven't sold. The number of bedrooms, land size, and other factors are also included in it.

Some of the best rental yields were found in Darwin, which saw houses pulling in a yield of 6.27%, while units had 6.11%, according to the RP Data-Rismark index. Canberra wasn't far behind, with a 5.74% yield for houses, and 6.08% for units. Sydney ranked third, with houses at a 4.97% yield and a 5.70% yield for units.

"More and more, properties are showing positive cash flow," said RP Data National Research Director Tim Lawless. "In fact, assuming an 80% loan-to-value ratio home loan and a discounted 5.4% interest rate, investors in apartments are likely to find that rental income goes a long way towards covering mortgage repayments across every capital city."

Looking ahead, Craig James, chief economist with CommSec, said property prices are more likely to rise in coming months, not fall. "The greatest worry is that prices rebound too strongly with demand outstripping supply, especially in Melbourne and Sydney," he said.