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Capital city housing values reached record highs in September, with an average dwelling value increase of 1.6% across the country, according to RP Data and Rismark International. But the trend was heavily centred around just two urban centres.
The latest data release marks what RP Data research director and analyst, Tim Lawless, has described as a 'technical' recovery in the housing market with the RP Data - Rismark Combined Capital City Index moving 0.7% higher than the previous record high, recorded in October, 2010.
Based on the combined capitals index, capital city dwelling values fell by 7.4% from the October 2010 market peak to the May 2012 trough. However, since the beginning of June, 2012, capital city dwelling values have increased by 8.7% through to the end of September, 2013.
According to Lawless, the September gains were primarily fuelled by Australia's two largest housing markets, Sydney and Melbourne, where residential property values in each city were up by more than 2% over the month.
"Sydney home values were 2.5% higher over the month and are up 5.2% over the September quarter while Melbourne values have seen a similar 2.4% month-on-month gain and a 5% quarterly lift. We haven't seen market conditions this strong since April, 2009 for Sydney and May, 2010 for Melbourne," he says.
However, while Sydney and Melbourne dwelling values powered higher in September, most other capital cities are recording much more subdued housing market conditions. Dwelling values moved lower in Brisbane (-0.3%), Perth (-0.1%), Hobart (-2.0%), Darwin (-2.5%) and Canberra (-0.7%), whilst Adelaide values posted a 1.1% capital gain over the month.
Lawless believes the latest housing market data is likely to be closely scrutinised by policy makers.
"Any debate about unsustainable growth in housing markets should be very much focussed on Sydney and Melbourne. Most other capital city housing markets are in fact showing only a modest growth trend. Perth's housing market, which was previously the stand-out for capital gains, has seen dwelling values rise by just 1.3% over the September quarter, while Brisbane's housing market remains sluggish, with values up only 1.1% over the past twelve months."
