Capital cities record strongest capital gain since winter '07

Houses in Sydney and Melbourne have recorded double-digit growth year on year, with strong demand expected to continue over the next three months given the perfect storm of low interest rates, a high rate of auction clearance and a rapid rate of sale.

Sydney still remains the most expensive city, with a median dwelling price of $650,000, and Hobart the most affordable with a median dwelling price of $310,000.

The RP Data CoreLogic August Hedonic Home Value Index results, released on Monday, also found capital city dwelling values increased 4.2 per cent over winter – the strongest capital gain during the same period since 2007.

RP Data research director Tim Lawless said it is likely dwelling values will rise even further during spring.

"Consumer confidence is also moving in the right direction after the post-Budget slump, which will add fuel to the exuberant buying and selling conditions we have seen during winter,’ Mr Lawless said.

"Since the beginning of 2009 we have seen values rise by a cumulative 50.1 per cent and 46.1 per cent respectively in Sydney and Melbourne.

"Over the last growth cycle we have seen Sydney dwelling values increase by 27.2 per cent and Melbourne values up by 19.5 per cent. Sydney and Melbourne were also the strongest performing cities during the 2009/2010 growth cycle."

Mr Lawless added there are potentially better investment returns to be had in the smaller capital cities where the growth trend is less mature and yields are also healthier. 

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