The RP Data Home Value Index has capital city dwelling values rising by 1.3% during January, suggesting a solid overall start for the 2015 housing market, driven by Melbourne, Sydney and Hobart performance.

Melbourne values were up 2.7% for January, Sydney values increased by 1.4% and Hobart property values were up 1.6%.

Highlights over 3 months to January 2015

Best performing capital city: Hobart +4.4%

Weakest performing capital city: Darwin -2.6%

Highest rental yields: Darwin houses with gross rental yield of 6% and Darwin Units at 5.9%

Lowest rental yields: Melbourne houses with gross rental yield of 3.2% and Melbourne units at 4.2%

Most expensive city: Sydney with a median dwelling price of $723,000

Most affordable city: Hobart with a median dwelling price of $341,000

Another exciting movement for property was the Reserve Bank of Australia cutting the official cash rate from 2.5% to 2.25% p.a.

This is paving the way for the cheapest home loans in 40 years!

There are predictions that we could see the standard variable mortgage rate fall to 5.7% and discounted variable rates to 4.85% – the cheapest home loans since July 1968.

The majority of experts anticipated that this reduction in the cash rate would occur much later in 2015.

Economists still agree a further reduction in rates is likely in 2015, in an effort to buoy our employment figures and continue the economic reset of the post-resources boom era.

According to RBA Governor Glenn Stevens, the Board has “taken time to assess the effects of the substantial easing in policy that had already been put in place and monitored developments in Australia and abroad.”

Striking a balance between economic growth and growth that risks over-stimulating the housing market is the difficult role that the RBA has to manage.

Other factors such as lower consumer confidence, stricter lending conditions, and affordability challenges may contribute to the moderation of housing market conditions in 2015.

RP Data’s Tim Lawless says that “Lower mortgage rates have the potential to add some fuel to what are already strong housing market conditions.”

Since rates began the downward trend in 2011, Australia’s capital cities dwelling values have increased by 19.6%.

This is a very tempting environment for investors at the moment.