House prices in capital cities are leading the charge in an acceleration of growth(ABC News: Kate Ainsworth)
Cotality's monthly index shows prices climbing to a fresh peak in June, with national dwelling values up 0.6 per cent last month and Hobart the only capital city to see prices retreat.
Rental price growth has slowed, with national rents rising 3.4 per cent over the last 12 months, which is the lowest annual increase since early 2021, according to Cotality.
The Reserve Bank will meet next week and market pricing is pointing to a 0.25 percentage point interest rate cut.
Housing prices reached a fresh peak in June as falling interest rates boosted market confidence.
The latest home value index from property research firm Cotality showed a fifth straight month of growth, with national dwelling values up 0.6 per cent, following a 0.3 per cent dip over the summer period.
Every capital but Hobart saw values rise in the month, with the Tasmanian city recording a fall of 0.2 per cent.
While regional markets were previously outperforming the capitals, the trend flipped in June, with the major cities recording a higher rate of growth.
Data from REA Group's PropTrack also showed house prices at historic highs, with Adelaide experiencing the strongest monthly rise, up 0.6 per cent — now up almost 10 per cent over the year.
"So far this year, the capital city markets are leading the charge," REA senior economist Eleanor Creagh told ABC News.
Eleanor Creagh expects further interest rate cuts to add to the momentum in housing demand.(ABC News: Daniel Irvine)
The median house price in Brisbane is now over $1 million.
"The biggest factor here absolutely is lower interest rates," Tim Lawless, the head of research at Cotality (formerly known as CoreLogic) explained.
In February of this year, the Reserve Bank cut interest rates for the first time in almost five years,before delivering its second cut this cycle in May, taking the cash rate below 4 per cent.
Cotality found Darwin recorded the strongest house price growth at 1.5 per cent in the month — largely due to the relative accessibility of investing there compared to other capitals.
"I think the growth trend we're seeing now, which is evident over the past 12 months, is really being fuelled by this renewed level of investment activity coming into the Darwin marketplace and just the sheer affordability," Mr Lawless said.
Tim Lawless says affordability constraints are holding back housing price growth.(ABC News: Geoff Kemp)
"We're looking at a median dwelling value in Darwin that's about $540,000 — quite low when you compare it to other markets.
Darwin's lower median home value makes it relatively affordable for investors compared to other capitals.(ABC News: Ian Redfearn)
"Most markets are at near record highs and have been pushing to new record highs month after month, for some time," Mr Lawless noted.
He labelled some markets as "extremes": "You've got markets like Perth, Adelaide, Brisbane that have seen values rise by more than 70 per cent in five years, and each of those markets has been at record highs for some time."
Despite the high rates of growth, Mr Lawless said it was not as strong as in recent years.
"If you go back, say, a couple of years, the rate of growth was about double what it is at the moment.
With the RBA expected to deliver more relief for mortgage borrowers in a week, falling interest rates are tipped to fuel continued price growth.
However, both Cotality and Proptrack cite several factors that should keep a lid on the increases, including elevated household debt, reduced demand from slowing population and migration growth, cautious lending policies and even geopolitical risk from events in the Middle East and Ukraine.
"Stretched affordability is putting a bit of a handbrake on home price growth, and although we're seeing an upswing in prices this year as rates fall, we're seeing a more gradual pace of home price growth compared to previous easing cycles," REA's Eleanor Creagh said.
"We're still seeing housing very much unaffordable for most Australians," Cotality's Tim Lawless agreed.
"I think there's still a few barriers to really see the housing market take off from here.
While borrowers may benefit from falling interest rates, it may be outweighed by the growth in home values, making owning a home no more affordable, according to Cotality.
The competition regulator has stepped in after years of complaints that REA Group is using its dominant position to the detriment of home sellers and real estate agents.
"The 2.4 per cent rise in national dwelling values through the first half of the year equates to a dollar value increase in the median dwelling value of approximately $19,000, eroding much of the benefits of lower rates when it comes to borrowing capacity," its report noted.
As for renters, the pace of growth for rents has been slower than that of housing values, Mr Lawless said, describing it as "an ongoing slowdown".
"The past 12 months, we saw national rents rise by just 3.4 per cent. So in annual terms, that's the lowest we've seen since early 2021.
The lack of affordable housing has led to a change in household structures, he said, including the resurgence of share houses andmulti-generational households.
"Some of the largest slowdowns we've seen in rental growth have been in the largest capital cities, Sydney and Melbourne, particularly in the apartment markets," Mr Lawless said.
"We've seen less demand coming in from net overseas migration, alongside other factors around rental affordability, just forcing a restructure in household structure.
"We're seeing more group households reforming, multi-generational households are becoming more common as well, which I think is a clear reflection of rental affordability just driving this ongoing change in how people actually form a rental household."