Sydney and Melbourne house values surge on lower interest rates

The Sydney and Melbourne property markets have driven the biggest monthly lift in national house prices in 16 years as falling interest rates and a shortage of supply combine to drive up values.

CoreLogic's monthly measure of values showed dwelling values across the nation's capitals jumped by 1.7 per cent in November, the biggest monthly lift since 2003.

The increase was driven by the nation's two largest property markets.

Dwelling values across the nation's capitals have had their largest monthly gain since 2003, according to CoreLogic.Credit: Peter Rae

House values in Sydney alone increased by 3.1 per cent, taking the median house value to $956,249. It was a $37,900 increase through the month, with values now up by 4 per cent this year.

It was the largest monthly increase in Sydney house values since 1988.

Overall dwelling values in Sydney rose by 2.7 per cent which was also the biggest lift since 1988.

Melbourne was not far behind with house values there jumping by 2.4 per cent, taking the median value to $774,023. Melbourne house values increased by almost $23,000 through November to be 2.9 per cent up so far this year.

It was the biggest monthly lift in Melbourne house values since May 2015.

Dwelling values across Melbourne improved by 2.2 per cent.

Both the Sydney and Melbourne markets are in the black over the past year.

CoreLogic's head of research Tim Lawless said property markets were responding to a string of factors including low interest rates and the end of uncertainty over tax policy in the wake of the Coalition's May election victory.

"The synergy of a 75 basis points rate cut from the Reserve Bank, a loosening in loan serviceability policy from APRA and the removal of uncertainty around taxation reform following the federal election are central to this recovery," he said.

"Additionally, we're seeing advertised stock levels persistently low, creating a sense of urgency in the market as buyer demand picks up.

"There's also the prospect that interest rates are likely to fall further over the coming months and an improvement in housing affordability following the recent downturn are other factors supporting a lift in values."

Melbourne's inner east has staged the biggest recovery with dwelling values there up by 8 per cent over the past year. Inner Melbourne values have lifted by 5 per cent.

In Sydney, the best performing areas included Baulkham Hills (up 4.3 per cent) and the inner west (up by 4.2 per cent).

Outside Sydney and Melbourne, almost all other capital city property markets are lifting.

House values lifted by 2.2 per cent in Hobart to be 4.2 per cent up since the start of the year making it the strongest market in the country.

There were also increases in Brisbane (0.9 per cent), Adelaide (0.5 per cent) and Canberra (1.8 per cent), while the struggling Perth market improved by 0.4 per cent.

CoreLogic's Tim Lawless says low interest rates, looser loan standards and certainty over tax are contributing to the surge in values.Credit: Janie Barrett

Only Darwin values dropped, slipping 1.8 per cent for the month to be down 10.9 per cent so far this year.

Mr Lawless said while all markets were showing strength, the premium sector was seeing the biggest lifts.

"The stronger performance across the higher value end of the market can likely be attributed to a combination of values falling more in this sector during the downturn, as well as recent adjustments to serviceability rules which has boosted borrowing capacity," he said.

"Additionally, the scarcity value of detached homes in many of the blue chip property markets is another factor supporting strong capital gains."