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RBA, government walk tightrope on soaring house prices

At the start of the year, one of the key concerns inside Treasury and the Reserve Bank of Australia (RBA) was how falling house prices in Sydney and Melbourne might be holding back the economy.

Eleven months on, the worry is that by “solving” one problem, another long-term issue is being created.

The question, especially if you desire to own your own home, is how long this surge in prices will last.

The question, especially if you desire to own your own home, is how long this surge in prices will last.Credit:Louie Douvis

According to CoreLogic, Sydney’s median house price climbed by $1260 a day and Melbourne’s by $770 a day through November. At $956,249, the median price in Sydney has now lifted double the level of the minimum wage in just four months. In Melbourne, the $774,023 median price has risen by 1½ times the minimum wage over the same period.

Clearly, such increases in prices cannot be sustained. Sydney is growing at an annualised rate of almost 40 per cent and Melbourne at almost 30 per cent, which – if continued – would see the median price hit $1.3 million and $1 million respectively by this time next year.

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