Median house prices in Sydney and Melbourne

The median price of a Sydney house rose 13.4 per cent to $641,000 in the year to March, below the 17.7 per cent increase in Melbourne, according to the Residex property research group.

Price growth for units was also lower in Sydney, 10.3 per cent annually to $449,000 compared with 16.6 per cent to $432,500 in Melbourne. While the difference between the Sydney and Melbourne unit median values was only $17,000, Sydney’s higher yield meant investors there gained $85 more a week.

But according to the chief forecaster, John Edwards, Melbourne’s optimism will soon slow, given stricter lending criteria and households being stretched to pay up to 49 per cent of income on mortgages. ”Melbourne will correct itself without more intervention from the Reserve Bank of Australia,” he said.

”Further hikes in interest rates could significantly increase the chance of bringing about the correction in the housing market which Australia has to date avoided,” Mr Edwards said.

”There had been a need for the RBA to adjust rates but the magnitude and speed of increase has been too large and too rapid. The net result is that our home loan interest rate is quickly placing home borrowers in a highly stressed situation and this is having an impact.”

Despite all the positive news and median increases, 20 per cent of Sydney suburbs were recording falling median house figures.

”The only city in Australia where there is no suburb which is falling in value is Melbourne. But some cities are in fact doing quite poorly,” he said.

In the past quarter 53 per cent of Brisbane’s suburbs lost value.

In the year to March there were 37,000 house sales in Sydney – 21 per cent up on the previous 12 months. Unit volumes rose 30 per cent.