The house price recovery gathered pace in May, with Sydney continuing to lead a broad recovery, as the number of properties listed for sale fell further.
The latest CoreLogic national Home Value Index rose by 1.2 per cent last month, its third straight monthly rise.
Sydney prices were up 1.8 per cent in the month, the biggest gain since September 2021, and up 4.8 per cent from January's low — the equivalent of a near-$50,000 increase in the median dwelling value.
Brisbane and Perth posted the next largest gains, up 1.4 per cent and 1.3 per cent respectively, while all other capital cities also experienced accelerated growth in the month.
"There are several main factors driving this — we think it is largely the demand from returning overseas migration … met with that higher demand, we've not seen very high volumes of supply," CoreLogic's head of Australian research Eliza Owen told The Business.
"In fact, inventory levels are still well below where they would usually be this time of year.
"There are also other factors at play such as a really tight rental market, this might be prompting some renters to instead buy if they can afford it, as well as investors potentially looking back to the market as rental income and yields rise as well."
Supply is certainly tight, with the number of homes advertised for sale falling further in May, with fresh listings 13.1 per cent below the five-year average.
CoreLogic said there were around 1,800 fewer homes listed in capital cities than at the end of April.
Appearing before Senate Estimates on Thursday Reserve Bank governor Philip Lowe said housing supply was one of the biggest challenges facing the country.
"Population growth is strong and housing stress is real. We need to address this; it's been an issue for a long time," Mr Lowe said.
Regional prices rising but not as fast as capitals
Regional home values increased, but at a more modest pace — up by half a per cent in May.
"Although regional home values are trending higher, the rate of gain hasn't kept pace with the capitals," CoreLogic's research director Tim Lawless said.
"Over the past three months, growth in the combined capitals index was more than triple the pace of growth seen across the combined regionals."
Data from the PropTrack monitoring service, owned by REA Group, similarly showed a strengthening recovery.
PropTrack's monthly house price index rose 0.3 per cent in May, leaving house prices more than 1 per cent higher in the past three months — the fastest quarterly price growth since the March quarter 2022.
"The decision by the Reserve Bank to lift the cash rate in May has not deterred the current home price rebound," report author Eleanor Creagh wrote.
"The rise in prices seen so far this year gathered pace in May, broadening and accelerating across markets."
According to the PropTrack report, auction activity has improved and clearance rates remain "firm".
"Although they are at or close to peak levels, interest rates may still rise further and the economy is also expected to slow — these factors may weigh on home prices in the months ahead, " Ms Creagh noted.
"However, the continued tightness in the labour market, stronger housing demand and the limited supply environment are likely to support an ongoing recovery."
Premium housing leading the rebound
In Sydney, CoreLogic data shows it's the most expensive houses, in the top quarter of the market, seeing the fastest recovery.
Values in the upper quartile have increased 5.6 per cent in the past three months, compared to 2.6 per cent across the more affordable segments of the market.
"Buyers targeting the premium sector of the market are still buying at well below peak prices," Mr Lawless said.
Despite the rebound, prices in Sydney's upper quartile remain nearly 12 per cent below their January 2022 peak — or more than $200,000 lower.
More broadly, capital city values remain well below their recent peaks, with Perth the only city where dwelling values have returned to record highs.
Highs and lows as property market heats up
Just before sunset in the nation's biggest property market, would-be buyers gathered.
After a slow start, a two-bedroom home in Sydney's inner-eastern suburbs went under the hammer for almost $2.5 million.
The owner, Rosemary Walker, was thrilled — she bought it for $35,600 in1978.
"I really thought I was going to faint, but fortunately I did have my medicine … my bubbles," joked Ms Walker, referring to her celebratory glass of sparkling wine.
The 85-year-old has decided to sell up and enjoy a quieter life in regional New South Wales.
"I've lived in this house for 45 years and it is a big wrench leaving it behind," she said.
"And it's been a wonderful [home] because of its location and neighbourhood. It has suited me very well.
But the dreaded date of birth has come into play, and I can no longer handle a house on my own."
Did she ever expect to fetch such a price?
"Never in a million years, no," she laughed.
Real estate agent Mark Daley said the market was strong because of low supply.
"The stock is so tight that [when] anything comes up, and if it is a good property in a good area like this is, it just goes incredibly well," Mr Daley said.
In Adelaide, investors are swooping in, and it is taking an emotional toll on buyers looking for a home.
A female bidder became visibly upset when it was clear she was going to be outbid for a home.
The deceased estate eventually went for $785,000 to an investor on the phone from New York.
"She plans to do a full renovation, so she'll gut it, renovate it and then rent it out," her cousin said.
Real estate agent Hamish Mill said his main buyers were people coming from overseas.
Mr Mill said there simply were not enough houses to meet the demand.
"The downturn is over, the market is going up," Mr Mill said.
"75,000 people are going to come into Adelaide over the next two years. That's 30,000 houses. There are not many at the moment."
