Property investors are returning to the Australian real estate market as first timers are no longer the only buyers in a recovering industry, it is claimed.

Although first time buyer's activity in the market is still strong, it is declining and now baby boomers that turned their backs on property investment due to the economic downturn are coming back.

According to Dan Molloy, managing director of the Real Estate Institute of Queensland, the last few months have seen resurgence in investor involvement. 'We are seeing investors looking at the marketplace again. The view is that interest rates are at the bottom of the cycle and rental yields have held up very well in the current market,' he explained.

The new trend comes as the spike in first home buyer activity which dominated the property market at the beginning of the year declines. According to the Commonwealth Bank lending to first time buyers was double the normal rate but that is now leveling off and this is partly due to increasing interest rates.

That decline is expected to continue as the government's incentive scheme which gives first time buyers extra grants ends in December.

The fact that historically low interest rates are expected to rise next year is also encouraging investors. 'Anecdotal evidence suggests investors are starting to come back. That's generally a result of low interest rates,' said Neil Fisher, chief executive of the Real Estate Institute of Australia.

'We need to be cautious. We've seen the Reserve Bank governor say interest rates are at all-time lows and say there will be increases in interest rates, probably at the start of next year. The astute investor will take that into account,' he added.

For those who want to come back into the market more new homes are set to be built and the latest figures from the Australian Bureau of Statistics show that loans for home construction are rising. Borrowings for home construction were up 2.8%, outpacing the 1% rise in loans written to buy established dwellings.

Macquarie Securities associate economist Benjamin Dinte said the data should assuage some of the Reserve Bank's worries over the lack of new housing and flow-on rise in real estate prices. Lending for home construction is now up by more than 60% from its low of October last year.