Capital city house prices have finished the financial year with double-digit gains, thanks to record low interest rates.
Home values rose 10.1 per cent in the 12 months to the end of June, the RP Data Rismark Home Value Index showed on Tuesday.
Sydney once again was the most expensive city with prices rising 15.4 per cent, pushing the median dwelling price up to $690,000, twice that of Hobart’s $328,250.
However economists expect the rise in house prices to moderate in the coming 12 months.
CommSec economist Savanth Sebastian said a rise in the amount of available housing should stop price hikes from getting too steep.
“It is likely that increases in land sales, healthy building approvals and solid new home sales will result in a greater supply of homes over 2014,” he said.
Mr Sebastian described the increase in house prices over the past year as “phenomenal”.
“The pent up demand for housing, low vacancy rates and strong rental yields have increased the attractiveness of property as an investment class,” he said.
“In addition, substantial cuts to interest rates continue to drive activity.”
Since the beginning of 2014 Reserve Bank governor Glenn Stevens has flagged a period of interest rate stability, saying it is still appropriate to keep the cash rate at its record low of 2.5 per cent “for some time yet”.
The last time the RBA cut the cash rate was by a quarter of a percentage point last August.
RP Data research director Tim Lawless said looking back at the year, house prices peaked last August when they rose four per cent.
“Since that time the rate of capital gain has generally trended towards a more sustainable level,” he said.
“The slowdown in dwelling value appreciation will be a welcome relief to policy makers and those seeking to buy into the housing market.”
The largest gains for the financial year were in Sydney and Melbourne, up 15.4 per cent and 9.4 per cent, respectively.
Hobart had the weakest gains, just 2.5 per cent.
St George economist Janu Chan said house prices will continue to keep gaining, but at a more moderate pace.
“Affordability constraints and less attractive rental yields for investment may start to deter some buyers,” she said.
“This should leave the RBA content to leave official cash rate settings on hold for the remainder of the year.”