Investors and home owners with capital tied up in residential property are currently being hit with a double whammy of increased interest rates and decreased property values.

Australian house prices in capital cities fell 0.2 per cent in August, with analysts predicting a similar level of decline in the months to come. Taking into account the increase in official cash rates announced today, and a string of interest rate rises looming, this is bad news for Australian home owners.

House Prices Down

As reported by The Australian , the latest seasonally adjusted figures from the RP Data-Rismark Hedonic Home Value Index were released yesterday and showed capital city property prices fell 1.2 per cent for the three months to August 2010. This latest fall in Australian property values takes the country’s median home price in major cities to $457,000.

House prices in state capitals fell 0.5 per cent in August, with the hardest hit major city being Perth, where residential property prices lost 4.8 per cent to $460,000 in value for the quarter.

Interest Rates Up

Despite the Reserve Bank of Australia (so far) resisting the temptation to  increase the official cash rate,  they have again warned that rates will need to rise soon to keep inflation in check.  So it is only a matter of time before rates rise, and it is anticipated that this will have a direct and immediate impact on variable mortgage rates, with banks expected to announce increases to their mortgage rates. Analysts believe the banks are preparing to add a further 0.15 percentage points to their mortgage rates (even without an RBA increase).

Space Rental as an Alternative ?

Australian Home Owners and Investors, are looking for other, smarter ways to improve the return on their residential property investments.

For decades, in times of financial need, home owners have rented out a spare room or property to boarders or tenants.  However, the prospect of sharing the home with a “stranger” is daunting, and many who have tried it have had bad experiences that they are not keen to repeat.

Recently, another option for property owners to generate additional income from their investment has emerged.  Property owners with some spare or unused space (a spare room., and empty shed/garage, or even an unused driveway), are now able to rent out that space to earn 100s of extra dollars a month.

The idea of renting out spare or unused space for other purposes is a relatively new concept.  Property owners are becoming aware that by renting out an unused garage or driveway for parking, or a spare garden shed or bedroom for storage, they can still generate an extra income, without the hassles of someone living in their space.

Online services such as FindaCarpark (which specialises in Parking spaces) and SpaceOut (which caters for a variety of different space rentals, including parking, storage, and even rural spaces for rent) make it easy for owners with space for rent, to advertise, and put them in touch with people in their own area looking for space.

These types of web based services are not usually free and there is typically a small listing fee (Findacarpark costs $15 and SpaceOut is currently just $6 to get started), but surely the potential to earn hundreds of dollars extra a month, for a space you are not using is worth giving it a go.

To find out more about how you can capitalise on making an extra income from your spare space,  see www.findacarpark.com.au or www.spaceout.com.au – or do a Google search for “Rent Space Australia“