With the country's jobless rate at a historical low, migration at a record high and taxes lowered, the environment is perfect for investors to buy in In the past 12 months, Australian interest rates have gone up, the Australian dollar has remained steady against the US dollar, occupancy rates for rental properties have started rising, and prices have stabilised in several cities. Australia's unemployment rate is at a historical low. Migration is at an all-time high. The economy is healthy. Taxes have been lowered. These facts must have an effect on the Australia property market next year. The question is what? Interest rates in Australia have moved up to about 7 per cent, still relatively low historically, and the rental yields about 4 to 5 per cent have only just started to go up, meaning investment demand has remained slower during this year. Although, as any specialist knows, it is foolhardy to talk about Australia's property market as if it is one homogeneous whole. Each city, and even sectors within each city, moves on different cycles. For example, the Sydney and Melbourne markets peaked in the middle of 2003, Brisbane grew until late 2004, and Perth is now Australia's strongest real estate market, booming through last year to this year. Astute investors who sold in Sydney in 2003 and moved into Perth houses have since doubled their money. So, where to from here? Evidence is that the rate of growth has started to slow now in Perth, and prices may be overheating. Perth is now the most expensive city in Australia for its real estate (based on comparison with median incomes). There are strong indications that parts of the Sydney market have already started to recover. Sydney has always been the most expensive city in Australia in terms of absolute prices, but interestingly, current affordability levels in this city are at their best level since the early 1990s. There is strong pent-up demand, and this market is set to fire again starting next year. Rentals will start to rise towards the end of next year too. However, certain areas will outperform others. The traditionally safe areas around the harbour are predicted to outperform the outer area - although one should remember the Sydney market as a whole has always proven to be one of steady growth, over the long term. The stand-out performer for the next six months appears to be houses in Melbourne. A study of house prices over the past 10 years shows that Sydney rose by 160 per cent and Melbourne 148 per cent. However, over the past five years, Sydney has gone up by 81 per cent, pretty much as expected. But Melbourne underperformed at just 35 per cent. This is about half of what we'd expect at this stage of the cycle. The past 20 years for Melbourne houses has shown growth of 348 per cent, so all evidence seems to show that over the past five years there has been underperformance. Yet the fundamentals in Melbourne are strong. The population is growing. The economy is sound, migration is increasing. The rental occupancy rates for houses are running at more than 98 per cent, and reports from Melbourne show many tenants are having to enter a bidding war to secure a home. Rents have risen 5 per cent in the past few months. We expect a catch-up in Melbourne house prices that may surprise many. It is the best time for some six years to enter this market for houses, although apartments in Melbourne may not recover until later. Rents around Australia have generally not risen significantly since 2001, although rental increases have now started, especially as mentioned in Melbourne. We expect them to gain momentum through next year in the other cities. Most analysts are advising their clients to immediately buy Melbourne houses while bargains can still be found, and to look for 'off-plan' Sydney flats early next year, especially in prime areas around the harbour. Off-plan flats with a two-year completion, will be well positioned to enjoy the next Sydney upturn. Today, the key to success in the Australian property market can best be defined by sustaining your ownership. The key is to buy a trouble-free property that has good rental and growth prospects over a long period of time. By taking the long-term position, it can mean almost guaranteed wealth ... security goes hand in hand with the patient and long-sighted pursuit of accumulating wealth. It is an endeavour that can not be hurried without risk. Michael Bentley is the managing director of Citylife Property Group