Sydney and Melbourne house prices have soared again, as the Australian property market surges by the most in two and a half years

Australian property prices have seen their biggest lift in two and a half years, as Sydney and Melbourne mount a roaring recovery.

Across the country, values jumped 0.9%, no doubt helped enormously by the fact its largest two markets both rocketed up 1.7% each, according to the latest figures from property research house CoreLogic.

"Although markets outside of Sydney and Melbourne aren’t showing the same recovery trend, most areas have either seen a reduction in the rate of decline or are seeing a modest trajectory of growth as low mortgage rates and a slight loosening in credit policy support buyer demand," CoreLogic head of research Tim Lawless said in a note issued to Business Insider Australia.

In part, Sydney and Melbourne are being supported by their stronger economies but also a higher investor activity, according to Lawless.

“While all regions are benefitting from low mortgage rates and improved access to credit, economic and demographic conditions in New South Wales and Victoria continue to outperform most areas of the country. Population growth is higher, unemployment is lower and jobs growth is stronger, providing a solid platform for housing demand.”

That bounce in Sydney and Melbourne has helped lift quarterly growth to around 3.5% in each city after a prolonged decline from their respective 2017 peaks.

Sydney prices are still 11.9% lower than they were in July 2017 while Melbourne prices are down 7.9%.

"Although housing values are now consistently tracking higher, at least at a macro-level, the national index remains 6.8% below the October 2017 peak, indicating that buyers still have some time to take advantage of improved housing affordability before values return to record highs," Lawless said.

However, a continued recovery appears well and truly tied to Australia's economic fortunes, with any further weakness threatening to cannonball further price rises.

"Household debt levels reached new record highs relative to their incomes over the June quarter, suggesting the sector is vulnerable to a shock or change in household circumstances," Lawless said.

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AMP Capital chief economist Shane Oliver has also predicted a softer price trajectory going forward.

"After an initial bounce, expect prices to be constrained on the back of still-tight credit, unit supply & softer economy," he tweeted in response to the data.

Certainly, the strength in Sydney and Melbourne wasn't shared across the other state capitals. The only other cities to rise were their eastern seaboard counterpart Brisbane and the federal capital Canberra, modestly budging 0.1% and 1.0% respectively.

Elsewhere, home prices in Adelaide held tight, while declines were recorded in the remainder. Perth was the worst performer, as prices slid a further 0.8%, followed by Hobart and Darwin.

With the Reserve Bank of Australia (RBA) widely tipped to cut the official interest rate again this year, prices could receive more support yet.

It will make its next decision on Tuesday.