Experts predicted this forecast due to rising interest rates and the First Home Owner Grant removal. These developments will have a big impact on the lower end properties. However, middle and upper end properties will get a boost from buyer trading, population, immigration growth and a steady economy.

Experts also foresee that the areas that will have the highest property price hikes are the places where the First Home Owner Grant has been more popular. This development is possible due to the domino effect that it can bring to the market.

John Edwards of the property research company Residex stated that a steady growth is possible for the $500,000-$600,000 properties in Melbourne and Sydney for the First Home Owner Grant has become popular in these cities.
He also predicted that property prices in Melbourne will go up by around six to seven per cent and this can make rental prices rise as well. Edwards also added that since that the value of the lower end properties grew 15 per cent in 2009, owners can possibly use that equity to trade up for middle end properties.

Meanwhile, Matthew Bell of the Australian Property Monitors predicted that the prices of the middle end properties throughout the country will go up by seven to ten per cent. He also added that once interest rates reach the 7.5 – 8 per cent mark, it will not be a negative aspect in the escalating property values.

Bell pointed out that the property price fall from March 2008 to March 2009 is due to the global financial crisis and not on the rates.
On the other hand, AMP Capital Investors Chief Economist Shane Oliver stated that property prices have already been high for six to nine months and that it is difficult to raise property prices for it can take out the affordability of some properties.

Swift markets movements began on the 1st of December after the RBA made their meeting’s minutes public. These movements were also backed by RBA Deputy Governor Ric Battellino’s speech.
Battellino stated that rates can maintain its current rate until February 2010 because the positive stance of the monetary policy puts the rates at normal. This comment of his during the Australasian Finance & Banking Conference in Sydney shocked a lot of market movers and as a result, this could bring the Australian dollar under the US$90 level.

He also claimed that the monetary policy is back at normal because the current level of deposit and lending rates for housing and business brought the cash rate to a pre-crisis level of 4.75 per cent.
Battellino’s remarks were delivered an hour after an Australian Bureau of Statistics report showed that economic growth during the September quarter is lower than expected. This slow down is due to the fall of the export market though imports are rising. However, household demands and businesses investment and equipment purchasing are going strong.

Also, the figure of the financial market that believes that another 25-basis point increase is imminent in February was reduced from 67 to 45 per cent.
Because of these developments, ANZ acting chief economist Warren Hogan said that the slow GDP growth shows that interest rates are not in neutral ground and that measures must be done to bring it back. He also added that Battellino’s remarks can cause a road block to gains via the cash rate in early 2010.

Hogan also stated that the emergency level of interest rates is now gone and that the policy for it will be tailor-fit to current conditions. On the other hand, Westpac chief executive Gail Kelly told after their annual meeting that the RBA might carefully raise rates in 2010 though the cash rate level is not within normalcy.
However, Westpac chairman Ted Evans commented that the road to recovery is still long. He also defended Westpac’s move to raise rates higher than RBA’s. Evans reasoned that since interest rates are rising, it is just right to increase costs to prevent a potential meltdown of their bank and of the Australian economic and financial system.

Evans also added that Westpac has absorbed rate increases rather than let their borrowers feel its effects and that it is unfair to subsidize home loan rates by holding down deposit rates and raising business rates.

Rates are likely to go up by 25 basis points to potentially peg the interest rate to 3.75 per cent.
Should it push through, this will be the first time that the RBA will increase rates for three straight months. However, ANZ chief economist Warren Hogan claimed that this condition is favourable despite the situation in Dubai.
He also added that though there is volatility in the financial markets, the local economy is stable and that the economic data for November registers positive marks.
Hogan also stated that the exposure of Australia’s local market to Dubai is minimal and the losses that are being incurred should not be a concern and that it won’t spark a second global financial meltdown.
After this meeting, the RBA board will meet next on February wherein another interest rate hike is expected.