Capital city housing markets had their best winter since just before the run-up to the global financial crisis, according to figures released on Monday by RP Data.
According to the company's Home Value Index, prices for capital city dwellings rose 4.2 per cent over the three months to the end of August, the strongest winter growth since the same time in 2007.
The surge was once again driven by the Sydney and Melbourne markets, which clocked increases of 5 per cent and 6.4 per cent, respectively, according to RP Data.
Canberra was next with a rise of 2.1 per cent, while all the other state and territory capitals posted rises of 1.5 per cent or less or, in the case of Darwin and Hobart, slight contractions.
Of the weaker-performing cities, Adelaide led the way with values up 1.5 per cent, followed by Brisbane recording at 1.3 per cent and Perth 1 per cent. There was a modest drop in values over the winter months in Darwin (-0.6 per cent) and Hobart (-0.8 per cent).
RP Data research director Tim Lawless says surging property values in Australia's two biggest cities have been a feature of the property landscape for more than five years.
"Over the latest growth cycle we have seen Sydney dwelling values increase by 27.2 per cent and Melbourne values up by 19.5 per cent," he said.
"Sydney and Melbourne were also the strongest performing cities during the 2009-10 growth cycle.
"Since the beginning of 2009, we have seen values rise by a cumulative 50.1 per cent and 46.1 per cent, respectively, in Sydney and Melbourne," Mr Lawless said.
Of the remaining state capitals over the same period, the next best performer was Perth, where values are now 15 per cent higher, followed by Adelaide at 9.9 per cent, Brisbane with 5.3 per cent and Hobart, where dwelling values slipped 1.5 per cent.
For the big cities, Mr Lawless forecast another strong house auction season, which officially got underway at the weekend.
"Considering the ongoing high rate of auction clearance rates, a generally rapid rate of sale and the ongoing low interest rate environment, it's likely that dwelling values rise even further over the next three months," he said.
"Consumer confidence is also moving in the right direction now after the post-budget slump which will add fuel to the exuberant buying and selling conditions we have seen during winter," Mr Lawless said.
The steep price increases, however, had compressed rental yields in Melbourne and Sydney, meaning investors will need to stay focussed on capital appreciation rather than investment returns.
"Investors are mostly concentrated across the Sydney and Melbourne apartment markets where capital gains have been strong but yields have been pushed very low," Mr Lawless said.
"Potentially, there are better investment returns to be had in the smaller capital cities where the growth trend is less mature and yields are also healthier," he said.