The value of residential properties across Australia's capital cities accelerated in the December quarter, pushing up home prices by an average 7.7 per cent in 2016.
Prices rose 4.1 per cent in the December quarter, with the growth again led by Sydney and Melbourne, according to the Australian Bureau of Statistics’ Residential Property Price Index.
Sydney house prices rose 6.1 per cent during the December quarter, while those in Melbourne rose six per cent.
Housing auction clearance rates have been on the rebound for several months, fuelled by strong demand from investors looking to take advantage of record low interest rates.
The growth has come despite Australian banks tightening lending criteria for property investors over the past year, under pressure from the banking regulator.
The central bank and federal government last week said they are considering options to help first home buyers break into a property market dominated by investors.
The ABS figures reveal the total value of Australia’s 9.8 million residential dwellings now stands at $6.4 trillion, having increased by $274 billion in the December quarter.
The mean house price is now $656,800, up $25,400 in the three months.
Melbourne was the strongest market with prices rising by 10.8 per cent in the 2016 calendar year. Sydney’s home prices rose by an annual 10.3 per cent, followed by an 8.8 per cent rise in Hobart and 4.1 per cent in Adelaide.
The Darwin market was the weakest, with prices retreating seven per cent.
“Price gains were far from uniform across the country, with the national aggregate masking important variation between regions and dwelling types,” JP Morgan economist Tom Kennedy said.
“Our base case is for a slowing in dwelling price growth in coming quarters as out-of-cycle mortgage rate hikes, more stringent regulation around bank lending, fading credit growth and already challenging affordability metrics likely prevent a sustained acceleration in prices,” he said in a note.