Although rental yields are expected to fall in 2010, this is actually positive for property investors as growth of property prices are expected to exceed that of the rental market.

We need to look at the whole picture to understand what is currently happening in the market.

Many First Home Buyers were sucked into the market last year due to the Government incentives. Those that were on the edge of buying would have bought and those thinking about it would have rushed to take advantage of the grants made available. This has been the case and supported by the reported record number of first home buyers in the market through 2009. Towards the end of 2009 we saw the rate of First Home buyer lending fall as they moved out of the market as grants started to disappear and interest rates started to rise.

Rising interest rates are another major factor that is going to keep first home buyers out the market now. With affordability becoming an issue for home buyers, property investors will take their place as they are able to take advantage of negative gearing tax benefits.

Property Investors are all focused on property that is high in demand. This includes the 1 and 2 bedroom new apartments, townhouses and house and land packages. They are all affordable and demand for rental of these property types is going to grow as First home buyers stay clear of buying. It is also important to remember the high migration levels to Australia and those from interstate are putting pressure on the states property markets.

The property market is expected to move up substantially this year, possible even more so that last year which means that although property prices will grow, and rental prices will increases, the growth or property prices will exceed the growth in rentals thus reducing the investors yield.

How to ensure you get the best of both worlds… Buy sooner and hold for longer.