Sydney and melbourne drive australia's two tier housing market

Sydney and Melbourne continue to power Australia's two tier housing market.

The latest RP Data Rismark July statistics confirm that the two cities are still enjoying strong capital growth, with dwelling values rising 2 per cent and 1.8 per cent over three months ending July 2014, taking dwelling values across the combined capital cities index 1.1 per cent higher over the three month period.

Broadly, capital city dwelling values have trended higher since June 2012; since that time the combined capitals index has recorded a cumulative gain of 17.4 per cent. The absolute standout performer for capital gains has been Sydney where values have moved almost 25 per cent higher over this time. Darwin and Melbourne also recorded stellar results with values up 20.4 per cent and 18.5 per cent respectively over the growth cycle to date.

Regional markets, though, continue to languish and recorded a 0.7 per cent fall over the June quarter and a year on year growth rate which is slightly higher than inflation at 3.5 per cent.

"Regional markets are of course diverse and range from agricultural regions which are largely driven by weather conditions and export factors, mining and resource-centric areas where the downturn in commodity prices and fewer major infrastructure projects are generally causing weak housing market conditions, and lifestyle markets where buyer demand is bouncing back and values are generally rising," comments RP Data research director Tim Lawless.

"The real litmus test for the market will be how much buyer demand is apparent during the Spring Selling Season. Winter has seen above average auction clearance rates however, as listings inevitably rise sharply over the coming months this will create the greatest test for the Sydney and Melbourne housing markets in terms of how strong value growth will be."