Home prices in Sydney, Melbourne continue investor-driven surge

A property investor-driven buying spree is continuing to push home prices higher in Australia's two biggest cities, with Sydney recording its fastest annual growth in more than 14 years.

The latest CoreLogic home price index for February showed prices jumped 2.6 per cent last month in Sydney, bringing the annual price rise to 18.4 per cent.

That is the strongest annual pace of growth in that city since December 2002, at the peak of the early-2000s boom.

Nationally, strong gains for Melbourne and Canberra led home prices 1.4 per cent higher over the month and 11.7 per cent up over the past year.

CoreLogic's head of research (Australia) Cameron Kusher said that Sydney and Melbourne have "shot the lights out" early in 2017.

"If anything we're actually seeing more strength in Sydney and Melbourne than we've seen over the last few months," he told ABC __news Online.

Mr Kusher attributed this renewed strength to another surge in property investment, particularly after the Reserve Bank cut interest rates twice last year.

"It's pretty clear it's not coming from first home buyers at the moment, we've pretty much got record low levels of first home buyer activity," he observed.

"Quite clearly it's coming from the investor segment of the market - both domestic investors and foreign investors - as well as people who already own homes upgrading."

The analyst added that the boom is defying most predictions of property price growth slowing this year.

"This growth phase has been running for four-and-a-half years now, you would think that it should be starting to slow at this point but it's actually reinflating, if anything," Mr Kusher said.

However, a few analysts are unsurprised by the continued boom, with SQM Research's Louis Christopher forecasting further strong gains for Sydney and Melbourne this year before the risk of a bust next.

While the east coast continues surging, the picture was starkly different in the west and north of the nation, with Perth and Darwin resuming their property price slide as the mining investment boom continued to bust.

Darwin posted a large 4.3 per cent monthly slide, leading to a 5.3 per cent annual drop, while Perth prices were off 2.4 per cent in February and 4.5 per cent over the past year.

"You can see that it's very much a Sydney and Melbourne centric growth phase, it's starting to spill out a little into Canberra and into Hobart, but most other capital cities are either seeing values fall or very little growth," Mr Kusher observed.

However, the extreme strength of the nation's two biggest housing markets is likely to be enough to prompt financial regulators to crack down further on lending to investors, Mr Kusher said.

"APRA [the bank regulator] and the Reserve Bank have really no choice but to step in and look at tightening things even further for the investor market, probably for the foreign buyer market as well, to try and slow down the rate of growth in Sydney and Melbourne," he said.

"We do think that over the year you will start to see that rate of growth slow, but it's going to take a lot more intervention from a regulatory perspective to try and slow down this speeding market."