Average house prices grew by an average 1.1 per cent across Australia in the first three months of the year, according to the Australian Bureau of Statistics's House Price Index, which takes the average of the nation's eight capital cities. Over the year, house prices jumped 8.6 per cent . Most capital cities posted strong gains. The mining boom propped up Perth prices, with house values rising a further 2.1 per cent in the first three months, to be up a whopping 32.1 per cent over the year. While house price growth has slowed, Perth house prices are still growing at the fastest pace in the nation. Over the quarter, Hobart led the way with a 3.8 per cent quarterly increase in house prices, with values up 10.5 per cent over the year. Brisbane followed with prices up 2.9 per cent over the quarter and 10.2 per cent over the year. In Darwin, house prices jumped 2.8 per cent over the quarter and surged 15 per cent from a year ago. In the south, house prices climbed 1.7 per cent in Adelaide over the quarter and 6.1 per cent over the year. In Melbourne, prices rose 1.5 per cent and 7.4 per cent over the year. Sydney lags gains, but also rebounding But Sydney house prices continue to struggle. Prices in Sydney, Australia's largest housing market, fell by an average 0.4 per cent in the first quarter, and grew at a meagre 1.5 per cent over the past year. Louis Christopher, head of property research at Adviser Edge, said house prices were rebounding around the nation, including a modest recovery in Sydney, with property investors flocking back to the market given rising rents. Despite modest growth in the first quarter, Mr Christopher expects Sydney house prices to grow 10.5 per cent in 2007. "I think what we will see from the June quarter onwards is the median house price numbers will move towards the numbers we're forecasting," he said. Around the nation Mr Christopher expects prices to rise between 5 per cent and 8 per cent in Melbourne this year, around 8 per cent in Brisbane and 4 per cent to 6 per cent for Adelaide. "We expect Perth house prices to record flat to negative house price growth. "If there were further interest rate rises of 50 basis points or higher, it is likely Perth will record steeper house price falls of between 7 per cent to 15 per cent for the 12-month period after the rate rises. "Conversely, a sustained downturn in commodity prices would also trigger further house price falls," he said. In Canberra, house prices are forecast to rise by 10 per cent to 13 per cent in 2007, assuming no more than a 25 basis point rise in interest rates by June. Mr Christopher said there were increasing signs that after a three-year downturn there was a housing recovery underway on the east coast of Australia. Auction clearance rates in Sydney, Brisbane, Canberra and Melbourne are higher than this time last year and indeed at their highest levels since the downturn commenced in late 2003. Improved rental yields and affordability in some cities was helping to push up house values, he said. Source From: AAP