Sydney and Melbourne may be the most coveted locations when buying a house, but they did not emerge on top in the recent report done by CoreLogic’s Hedonic Home Value Index. What was proclaimed as the best-performing capital city was Adelaide, with a 4.5 per cent rise in dwelling values over the last quarter for both houses and units.

“Most of the increase has been driven by the unit market there, which is much stronger month-to-month and even quarter-to-quarter in some of the smaller cities like Adelaide,” said CoreLogic’s Cameron Kusher. “That’s where you can see a bit of volatility.”

Adelaide's year-on-year increase is at 3.6 per cent, hence pushing the median price to $410,400. Only Hobart, considered as Australia’s weakest performing capital city, has a cheaper median dwelling value of $330,000.

According to Nick Ploubidis, principal of LJ Hooker Kensington in Adelaide, there is a surge in interest from interstate investors in the relatively cheap apartment market.

“Investors are loving the returns you can get here. Especially with apartments, you can get a unit for under $400,000 and there’s very low vacancy,” he said.

Australia’s city dwelling values increased by an average of 1.7 per cent overall, with every capital city except Perth recording a lift in dwelling value.

“The results show value growth moved at a faster pace compared with the final three months of 2015,” said Tim Lawless, research director of CoreLogic RP Data.

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