Due to rising interest rates last year, home prices in Australia are well below the peak levels, though home prices did show a slight increase in the last three months of 2010.

The RP Data-Rismark Hedonic home value index increased in the December quarter by 0.4 percent and 4.7 percent over the whole year. In the capital cities home prices increased by 0.2 percent in the quarter.

Four times the interest rate rose in 2010 in the capital cities and the property market was shaken by it. The rates ended up at 4.75 percent, which is up 1 percent from the previous year.

Australia’s property market peaked last year in May and remains below that peak currently but optimism remains that it will get better. The largest increase was in January of 2010.

Most of the growth in the capital city home prices occurred in the first quarter of 2010. Home prices increased by 3.6 percent compared to 4.7 percent over the year.

The average home price in all regions in Australia was $420,000 the last three quarters of 2010 and $475,000 in the capital cities. Sydney is the most expensive capital city with median home price at $525,000 and Hobart comes in at the least capital city at $325,000.

Australians are hopeful that interest rates will remain where they are for a while and interest rate hikes will stop or at least decrease. If rates continue to increase throughout 2011 the Australia property market will not see as much forward momentum as Australians would like to see.