House prices across all capital cities rose strongly during the June quarter, boosting confidence that the sector is well and truly on the road to recovery.

The latest data from the Australian Bureau of Statistics (ABS) showed the price index for established houses of the eight capital cities climbed by 4.2%. This solid increase followed four straight quarters of decline in the ABS series.

Melbourne staged the strongest gain at 5.2%, followed by Sydney at 4.9%. Brisbane managed a 2.5% gain, Canberra 3.6% and Darwin 2.4%. Even Perth which has seen values tumble over the past two years saw prices jumped by 2.7%.

In annual terms, Darwin outperformed the rest of Australia with prices soaring by 11%. Adelaide is the only other city to finish in the black while the others recorded moderate losses during the year.

The upbeat result is a welcome boost to the market where talk of dramatic drops in value dominated much of the past 12 months.

"We're certainly not talking about a strong result here, but evidence of moderate growth flies in the face of incessant talk earlier in the year that house prices would drop into free-fall," said Harley Dale, chief economist with the Housing Industry Association.

"The fact that house prices have held up is an important factor in Australia dodging the massive economic fall-out evident in the US and UK. Signs of life in the real estate market will also be helping to underpin consumer confidence at a time when confidence in Australia's economic prospects is very important," he said.

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