The Real Estate Institute of Victoria's Robert Larocca says: ''When you look back on the year, I just think that it's apparent how important and how directly linked the state of the property market is to the state of the economy … I don't think you can expect to see the property market have a year of strength if people were not confident in their economic prospects.''
Even the impact of lower interest rates was muted because of the economic conditions that prompted the rate cut, he says.
Unless the economic situation changes dramatically, Mr Larocca says prices overall are expected to increase by only a couple of percentage points towards the end of this year. ''But we hope that the impact of the two rate cuts we've seen so far, and hopefully another one next year, will encourage just enough people back into the market to improve circumstances a bit.''
Renters are the big winners from the current market and should find their search for accommodation easier, with the vacancy rate rising to more than 3 per cent in October for the first time since 2006, he says.
''The circumstances over the last few years have really been much tighter than we would have otherwise liked to see [for renters]. Hopefully it is going to be a bit easier for them in the next few years.''
Buyer's advocate Peter Rogozik says most Melbourne properties underwent a price ''correction'' last year. ''The total number of transactions were down,'' he says. ''In 2010, there were around 51,000 transactions. In 2011, there were around 41,000. Certainly, selling agents and buyer's advocates had a really, really tough year.''
Despite that, quality properties, which he estimates make up less than 5 per cent of the market, hold their own. Properties within two and 10 kilometres of the Melbourne city centre with high-quality streetscapes and scarce or unique features still managed to attract multiple bidders to auctions, he says.
Mr Rogozik believes the market bottomed out in October and is starting to recover. His tip for the new year is to consider buying an apartment. ''Apartments give the opportunity of entering the market at an affordable price in a traditional blue-chip suburb, such as South Yarra.''
His second piece of advice is to buy in an area adjacent to a recognised blue-chip suburb, such as Brunswick East's neighbour Coburg, or Kingsville, bordering Yarraville. ''These suburbs have the same characteristics as traditional blue-chip suburbs without the price tag.''
Mr Rogozik says 2012 will present investors with a ''final window of opportunity'' to enter the market, before a substantial price increase within a short time, as happened in 2009. ''My advice to investors who have been sitting around, and I know they are out there, is that they should make their move in 2012, otherwise they will be disappointed when they hear the market is spiralling upwards very quickly,'' he says.
Peter Hay, managing director of Hay Property Consultants, says: ''I think, overall, it was a pretty tough year. I think good properties sold well and held their value but anything that wasn't unique has taken a bit of a battering. Vendors have had to adjust their asking prices down to meet the market and, as the year unfolded, it became a buyers' market.''
Mr Hay disagrees that the market has bottomed out. ''I think it's still going, unfortunately. I think it will continue in 2012 and I think that it will be a good buyers' market, for both first and second-home buyers, particularly first home buyers, because builders are starting to hurt. 'House and land packages just aren't selling at the moment; vacant land in new estates is not selling. People are just sitting on the fence waiting to see what happens. There is a lot of uncertainty out there and I think we have probably got a bit more to come. 'Interest rates don't seem to be making much impact and the trouble is that the banks don't pass them on, so people have got no confidence at all to go out and borrow more money to upgrade, or jump in for the first time.''
Mr Hay says he can't see much that is likely to change the situation any time soon. ''Job security is probably the highest thing on the agenda and, when job security is not there and there is no real wages growth, we are seeing that people are just sitting on the fence. I don't think there will be any improvement until the end of next year.''
His advice for investors is to look for property adjacent to areas where councils have developed precinct plans that promote medium-density developments. Coburg, Dandenong and Frankston have been implementing their precinct plans; buying next to the revitalised areas will enable investors and home owners to benefit from the increased amenities, Mr Hay says.
''You study the precinct plans and look at where they are re-zoning property and allowing medium-density usage. That's the key - study the plan.''
For those with a less financially oriented agenda, Mr Hay says now is a great time to pick up a holiday house.
''If you are looking for a holiday property, have a look at the Mornington Peninsula because that has taken quite a hit over the past 12 to 18 months, or probably two years. And there is some very good affordable property. You can even buy views now for under $700,000.''
Experts' word on 2012:
■ No big price increases
■ Rental situation to improve
■ Good time to invest
■ Holiday homes affordable
■ Target areas with precinct plans
■ Apartments a good buy
Source: The Age Domain