Australian home values have posted their strongest quarterly gain since the end of the 2010 boom, with signs that record low interest rates are creating conditions for a new boom this spring.
The performance comes as figures show the number of investors piling into the market hit a record in one state and residential construction activity has staged its first rally in three months.
RP Data-Rismark report dwelling value rose 4 per cent in the three months to August, posting the highest quarterly rate of capital gain since April 2010, right before the last boom began to fizzle.
In Sydney, dwelling values shot up 5.4 per cent and Melbourne rose by 4.8 per cent. They increased 3.7per cent in Canberra, 3.4 per cent in Darwin, 3.1 per cent in Perth and 1.7 per cent in Brisbane.
"It's definitely the low interest rates that's driving this activity," said RP Data analyst Cameron Kusher. "The thing from here will be what happens in spring. It's looking like a pretty good spring selling season - the amount of stock on the market is fairly low and clearance rates are quite strong."
Last weekend, nearly 2000 homes went under the hammer around the country and the clearance topped 75 per cent. It was a record 84 per cent in Sydney and a robust 75 per cent in Melbourne, according to analyst groups.
Louis Christopher, managing director of SQM Research, said the country had seen its strongest winter market in years and it was set to continue for spring. "I'm still convinced its a very strong market out there, particularly for Sydney."
Property investors have become an increasingly dominant force driving the market, figures from mortgage broker AFG show.
Nearly half of all mortgages (49.5 per cent) written in NSW in August were to investors, rising from 44.7 per cent last year to hit a new high. In Victoria, the market share for investors rose to 36.7 per cent from 35.2 per cent last year.
"With property prices starting to rise, and rates set to remain low for a while yet, a lot of investors are anticipating the next property cycle," said AFG general manager Mark Hewitt. "The NSW figure is very strong, but in part this is because two thirds of first home buyers exited the market after the withdrawal of buyers' grants."
But RP Data-Rismark has also identified what it believes could be a sign that the strong growth in dwelling values seen in June and July have started to taper off.
The national dwelling value rose just 0.5 per cent over the month, thanks primarily to softer conditions in Sydney (0.6 per cent) and Melbourne (0.2 per cent).
There are also some signs of life in residential construction, with the total number of dwelling approvals jumping 10.8 per cent in July, seasonally adjusted, according to the Bureau of Statistics.
However, much of the strength was seen in the apartment market, where building approvals rose 24.4 per cent compared with 3.9 per cent for detached homes.
In Victoria, unit approvals soared 70 per cent but house approvals fell 1 per cent.
"The big lift this months seems to have been caused by a few large apartment project approvals, particularly in Melbourne and Canberra," said MacroBusiness economist Leith van Onselen.
"If you remove the lumpiness of the apartment market it's still a pretty soft up trend."