House prices set for a mixed year

Aussies who consider home buying next year will be faced with a changing marketplace caused by rising interest rates and improving economic conditions.

The removal of the first Home Owner Grant and rising rates are likely to have an adverse impact on properties at the lower end of the market, while properties at the middle and upper end will be supported by factors such as buyers trading up and a resilient economy, News Limited found.

Prices in capital cities are also likely to vary enormously, with areas where the first Home Owner Grant was most popular liable to witness the biggest price rises, the report said.

"There will be good growth in the $500,000-$600,000 brackets in Sydney and Melbourne because these were the cities where the First Home Owner Grant was most popular," John Edwards of property research company Residex, told the news provider.

Meanwhile, Australian Property Monitors economist Matthew Bell said that he did not expect property prices to be negatively affected by interest rates until mortgage rates hit 7.5-8 per cent, the report noted.

Such market fluctuations will encourage bank customers to compare home loans in search of the best deals. The latest Bankwest/Mortgage and Finance Association of Australia (MFAA) survey found that first-time home buyers are increasingly looking for cheaper and smaller houses in their attempt to break into the property market.

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