MELBOURNE house prices rose to a record high index value of $454,524 in July, a jump of 8.5 per cent this year.
And prices are expected to continue climbing despite the threat of higher interest rates.
Melbourne home values have now risen $17,173 above their February 2008 peak of $437,351, after which the global financial crisis knocked prices down to $419,000.
The national research director of research firm RP Data, Tim Lawless, said prices were growing modestly and showing no signs of stopping.
"Not only has Australia's residential property market outperformed the other major Western markets, it has also provided superior returns compared to shares, commercial property, superannuation, hedge funds and private equities," Mr Lawless said.
"Australia's residential market has been further supported by low mortgage default rates, at just 0.6 per cent, compared with 5 per cent in the United States and 3 per cent in the United Kingdom."
Based on 145,000 sales, house prices had risen by an average of 5.9 per cent this year in every capital city.
Nationally, home values have risen 1.8 per cent past their February 2008 peak.
Australia-wide, Mr Lawless said, homes rose by an average of 0.9 per cent in July alone boosted by historically low mortgage rates and only a small rise in unemployment.
Rismark International managing director Christopher Joye said despite upcoming cuts to first home owners grants and forecast rate rises, home prices should keep rising.
"We believe the housing market will grind out further modest gains over the course of the next 12 months," Mr Joyce said.
"Home values are now increasing steadily in all areas including Australia's most expensive suburbs. This has eviscerated the popular myth that the recovery was being driven exclusively by first timers at the cheaper end of the market.
"While first-time buyers initially furnished the early momentum, upgraders and investors have now taken over the baton."
Macquarie Bank interest rate strategist Rory Robertson said the likelihood of interest rates rising on October 6 by 25 basis points was increasing.
"While the latest brighter news on our still-weak economy suggests the Reserve Bank soon will start edging away from its loosest ever monetary policy stance, the case for aggressive rate hikes still seems rather weak," Mr Robertson said.