According to the Real Estate Institute of Australia (REIV), the Melbourne and Sydney property markets have been the worst performers over the past 5 years.

The growth rate in Melbourne was 3 percent which outperformed Sydney and Perth, where prices actually dropped between 3 and 4 percent. Property in the mining areas of Australia are likely to lose appeal, as RIO Tinto scales back production as demand for resources softens.

A Residex spokesman said the Melbourne market would be supported by a strong demand for rental properties due to the increasing number of overseas arrivals.

History tells us that after a share market downturn, the Melbourne and Sydney property markets tend to surge. In the 2 years following the 1987 crash, the Melbourne median price grew by 40% from $100,000 to $140,000. Sydney’s median increased by 42% from $130,000 to $185,000. Similarly after the terror attacks of 2001, the share market crashed and investors looked again to property for increased stability.

As we head into 2009 with falling interest rates, lower vacancy rates and rising rental returns, investors will put the 2008 share market crash behind them once again and head for the safer eastern cities of Melbourne and Sydney.

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