RECORD low interest rates, cashed-up investors in overdrive, foreigners swooping on bargains and, naive home hunters fuelling an auction frenzy - buying property was this year's most fashionable pastime.
Runaway extravagance set the buying tone this year, with consumer confidence cemented after the federal election and buyer activity accelerating in the final months of the year.
Experts say 2013 is just of the iceberg for the next property cycle with homes under $1 million in capital cities expected to be in short supply amid even higher demand next year.
The key drivers of the property market this year were record low interest rates prompting a return of first-home buyers, and cashed-up SMSF investors and foreigners driving up prices at the top end.
What resulted was huge auction crowds, ordinary homes selling for way above reserve prices, and budget buyers being locked out of inner-city markets.
Veteran property expert Terry Ryder expects less "herd-like" buying behaviour in 2014.
Mr Ryder said investors shaped capital city markets this year, with other buyers following the crowd to million-dollar suburbs, particularly Sydney.
"Buyers have been favouring the upper end of the market in capital cities and I think you will see less of that and smarter buying spread across more affordable middle-ring suburbs, " Mr Ryder said.
Savvier buyers would have invested in these areas at least a year earlier, Mr Ryder said.
"They will be more rational and targeted in their purchasing, rather than having a herd
Homeowners in Sydney, Perth and Melbourne enjoyed the strongest gains on their bricks and mortar this year.
To the end of November, Australia's combined capital city home values increased by 8.3 per cent with house values up 8.3 per cent and unit values rising by 8.4 per cent.
Buyers have been favouring the upper end of the market in capital cities. Source: News Limited
RP Data research analyst Cameron Kusher said the market will enter 2014 with strong momentum.
He said that although values are rising, high growth rates are largely contained to Sydney (13.7 per cent), Melbourne (6.1 per cent) and Perth (8.6 per cent); all other capital cities have recorded value growth of less than 4.5 per cent so far this year.
"The biggest wildcard for the housing market in 2014 is likely to be what happens with the labour force."
The official forecasts for unemployment indicate it will peak at 6.25 per cent next year, up from its current level of 5.8 per cent.
"If people start to become nervous about their job security it is likely to result in a lower level
of demand for housing and impact on capital growth."
Mr Kusher said that investors have missed their best opportunity to capitalise on capital growth in Sydney, Melbourne and Perth as gross rental yields are now falling in each of these cities.
Year in review 2013
Highest median value
House: Point Piper, Sydney, $6,312,475
Units: Dawes Point, Sydney, $2,452,651
Lowest median value
House: Ungarie, Central West NSW, $62,200
Unit: McCracken, Outer Adelaide, $109,609
Highest gross rental yields
House: Johnston, Darwin, 14.7%
Units: Ultimo, Sydney, 11.2%
Highest gross rental yields within 10km of capital city
House: Larrakeyah, Darwin, 8.3 per cent
Unit: Ultimo, Sydney, 11.2 per cent
Greatest 12-month change in median values
House: Kirribilli, Sydney, 42.5 per cent
Unit: Enmore, Sydney, 46.9 per cent
Highest median weekly rent
House: Newman, Pilbara, $2,165
Unit: Port Hedland, Pilbara, $1,300
Highest gross value of sales
House: Mosman, Sydney, $805,977,253
Unit: Surfers Paradise, Gold Coast, $571,568,317
Source RP Data
Tiny houses, big prices
The 2013 buyer frenzy fetched big prices for tiny houses with home hunters willing to pay whopping prices to avoid skyrocketing strata fees and restrictive body corporate rules.
This one-beder house in Annandale in Sydney's inner west is on 300sq m and sold for $900,000.
The tiny Annandale home fetched $900,000. Source: Supplied
Similarly, plain suburban homes had buyers in a spin in Australia's largest housing market.
This regular house in the average Sydney suburb of Croydon went for $1 million over its reserve.
The home in Croydon in Sydney sold for $1 million above reserve. Source: Supplied
A large crowd gathers for the auction at 12 Anthony St, Croydon. Source: Supplied
Sydney estate agent Wayne Vaughan - who sold the house for an amazing $2.385 million - said there is no limit to what desperate buyers will currently fork out for their dream home.
"In 24 years I have never seen anything like it," Mr Vaughan, of McGrath Epping, said. "There's just no rhyme or reason behind it."
The winning bidder was a mother and son team.
Asian buyers also shaped the sector, fuelled by a low Aussie dollar and Beijing's ban on buying more than one property, with some developers marketing new units exclusively to offshore buyers.
Meanwhile, foreign buyers snapped up one in every eight new properties built this year - up from one in 20 properties in 2011, National Australia Bank research revealed.
At $17 million, this stunning three-bedroom penthouse in Sydney's CBD must have seemed like a bargain to a Chinese investor who bought it for his children attending university in the city.
A Chinese investor paid $17 million for the Sulman penthouse in Sydney’s CBD. Picture: Supplied Source: Supplied
Year's top sale
The most expensive home sold in Australia this year had a $52 million price tag, just shy of the $57.5 paid for the nation's priciest home - in Mossman Park, Perth - which changed hands in 2009.
Altona in Sydney's Point Piper has arguably the most spectacular backyard of any home in the country with stunning views of the Opera House and Harbour Bridge.
Owned by Deke Miskin, a former publishing mogul, and his bikini-designer wife, Eve, the Point Piper property was on the market since 2007 without asking price.
The buyer was an investment company whose sole director is Xiuzhen Ding, a Chinese-born resident of Elwood, a beachside suburb in Melbourne.
Boasting a series of terraces overlooking lawns and the harbour, Altona also has a heated pool, private jetty and sauna, along with a rooftop deck and a fully kitted out boathouse which would put most Sydney homes to shame.
There are also eight bedrooms and seven bathrooms.
Altona on Wunulla Road in Point Piper sold for $52 million. Source: Supplied
At the other end of the trophy home spectrum, massive mansions on the Gold Coast became empty monuments to pre-GFC extravagance as an oversupply and bank repossessions drove values down to a fraction of original asking prices.
One of the biggest homes on the Glitter Strip sold for less than a quarter of what it cost to buy the land and build.
The huge unfinished house on the elite Sovereign Islands was put on the market by mortgagee, ANZ Bank after court action in Australia and Singapore to evict the owner.
The six-bedroom, seven-bathroom mansion had an initial construction cost of $12 million and sprawls over four blocks that cost $9.44 million in 2005.
But the $21.44 million outlay came nowhere near to being recouped at auction with a civil engineer picking up the property for $5.3 million.
This home on the Gold Coast sold for less than a quarter of what it cost to buy the land and build. Source: News Limited
In a healthy sign for the industry, lower rates have helped reduce the number of mortgage black spots across Australia.
Fitch Ratings, the credit ratings agency, revealed that by the end of September this year delinquency rates across Australia dropped to 1.25 per cent, down from 1.45 per cent at the end of March.
Tasmania was the worst-performing state for borrowers more than 30 days behind on their mortgages - largely due to stagnation in the local housing market and unemployment.