In both cities, values so far this year are now in positive territory.
It wasn’t just houses. Unit values in Sydney lifted by 1.2 per cent in October to be 4.2 per cent up over the quarter while in Melbourne they jumped by 2 per cent to be up 5 per cent over the past three months.
Nationally, dwelling values across the country increased by 1.2 per cent which is the biggest increase since May 2015.
CoreLogic research director Tim Lawless said there were key factors at play in Sydney and Melbourne with tight job markets, strong population growth and low interest rates all combining to drive up values.
Across the country, it appeared the property market was quickening.
“It is becoming increasingly clear that the housing market rebound is gathering pace, both geographically and across the broad valuation cohorts, off the back of lower mortgage rates and improved access to credit as well as an improvement in affordability relative to the market peak several years ago and consistently high demand via population growth,” he said.
House values increased in almost every capital with lifts in Brisbane (0.9 per cent), Adelaide (0.5 per cent), Hobart (0.9 per cent), Darwin (0.7 per cent) and Canberra (0.8 per cent). Values in Perth slipped another 0.4 per cent.
Mr Lawless said the top quarter of property markets, particularly in Sydney and Melbourne, had lifted the most over the past three months but their cheapest housing was also now becoming more expensive.
He said there had been an increase in total sales activity but advertised stock remained around levels last seen during the global financial crisis.
“Local advertised stock levels are 11 per cent lower relative to last year and tracking at the lowest level since 2010,” he said.
“Such a small pool of available stock against rising buyer demand is creating some competitive pressure amongst buyers which is adding to urgency in the market and supporting upwards pressure on values.”
Financial markets have wound back expectations the Reserve Bank will use its Melbourne Cup Day meeting to cut official interest rates from their current record low level of 0.75 per cent.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.