Property values may soon be on the rise again, if the latest trend in figures is an indication.

The RP Data-Rismark National Property Values Indices showed Sydney's property values increasing by 0.11% for the September quarter, with strong unit performance backed by strong rental yields and low vacancy. On a national level, property values declined by 0.5% in the September quarter - a marked improvement from the June quarter when values fell by 2%.

RP Data national research director Tim Lawless said the latest numbers showed that the drops in property values over the winter have lost their momentum.

"Overall residential property market conditions appear to be improving, with these latest figures indicating the downward trend of national property values is slowing," he said.

This backs the claims of property experts who had said the gap between Australia's lacking supply and growing demand would result in values increasing again soon on a national level.

"Virtually all economists, including the Treasury and RBA, believe that there is a major disconnect between housing demand and supply in this country," said Rismark International managing director Christopher Joye. "We need to produce over 190,000 homes annually but the supply side is only currently delivering about 145,000 homes per annum. Every year it gets harder and harder to bring new supply online."

Joye said some economists are predicting the supply shortage will grow to 200,000 properties by 2010, ensuring a near certain rise in values over the medium to long term.

Lawless said RP Data had recently experienced an increase in interest in lower priced segments of the market by its subscriber base

"It's the lower priced segments of the market that are likely to lead any property market recovery, with first homebuyers leading the charge," he said. "The doubling of the First Home Owner Grant has had an immediate impact on market traffic, however we're yet to see this increased level of traffic translate into any real buying activity."

The strongest performing area in Australia remained Adelaide, where property values have risen 3% during 2008 and 7.8% over the 12 months to the end of September. It also remains the most affordable capital city despite the growth, with a median value at $407,385, according to RP Data.

The best rental yields for investors could be found in Darwin, with houses returning an average rental yield of 6.42% and units returning 6.56%. This compares to national averages of 4.4% for houses and 5.3% for units, according to RP Data.

Most recently, Sydney was the only market to record an increase in dwelling value during the September quarter. Over the three months ending in September, Sydney dwelling values rose 0.11%. This is mainly due to the unit market, where values increased 0.56%, backed by strong rental yields and vacancy rates still around 1%.

Perth was the worst performer nationally, with dwelling values down 6.24% from the 12 months back to September 2007. Units in Perth are the most expensive in the country, at $449,500, and rental yields are the lowest in the nation at a return of 4.52%, according to RP Data.