Homes prices across Australia's capital cities have rebounded and could continue to climb if the central bank slashes rates again.
The RP-Data-Rismark Home Value Index recorded an average one per cent increase in home values across the eight capital cities in June, partially reversing a 5.3 per cent fall in the 12 months to May.
It was the biggest rise in home prices since March 2010.
RP Data research director Tim Lawless said the Reserve Bank of Australia's May and June official interest rate cuts had helped spur demand in the property market.
The RBA cut the cash rate by 0.50 percentage points in May and 25 percentage points in June, taking it to 3.50 per cent.
Mr Lawless said major banks had passed on most of the recent rate cuts to their customers.
"The catalyst for improvement in market conditions is likely to have been the 55 basis point (0.55 percentage points) reduction in the average discounted home rate over May and June," he said.
Rismark chief executive Ben Skilbeck said the ratio of house prices to income levels was at its lowest level since 2003, meaning the property market had become more affordable.
He said further interest rate cuts would send prices higher.
"The rebound in capital city prices during June indicates that the RBA's relaxed monetary policy stance may have reached the point of inflating asset prices," he said.
"If interest rates continue to be pushed lower, asset prices will inevitably respond to stimulus."
Most economists surveyed by AAP on Friday expected the RBA to cut by between 0.25 and 0.75 percentage points in the next six months.
The RP Data survey found Hobart recorded the sharpest increases, with prices climbing 2.7 per cent, followed by Perth and Canberra where prices rose two per cent.
Prices in Sydney, Melbourne and Brisbane increased by an average of one per cent.
The worst performers were Adelaide (down 1.1 per cent) and Darwin (down 0.7 per cent).
However, Mr Lawless said home prices were still down more than 1.2 per cent from the beginning of 2012.
Keep reading - next article