By Robert Carry

Interest rate hikes will help restore balance to Australia's residential real estate market and stave off a runaway price increases, the chairman property group Ray White has claimed.

Brian White, current chair of the largest property group in Australasia, described the last 12 months as the most volatile he had known in the Australian property sector.

White added that the recent decision by the Reserve Bank of Australia (RBA) to lift the official rate from 3.0% to 3.25% and the prospect of more rate rises would help prevent the property market from over-heating.

"A booming housing market produces very few long term benefits. Sure it's great for sales over the short term but then comes the hangover and the pain. Lifting interest rates from near record lows now will help reduce the need for any draconian steps later and it well help create a well balanced market," said White.

White said returning interest rates gradually to more traditional levels would help ensure house prices kept pace with inflation. "We've lived for decades with interest rates much higher than they are now and I have little doubt we'll be absorbing the latest interest rate rise and the other expected increases quite comfortably," he said.