House prices in Sydney and Melbourne are continuing to surge, the latest data suggests.

Releasing its latest report, CoreLogic said overall house prices throughout Australia increased by 1.1 in February and have risen by 6.1 percent over the past year.

Leading the way is Sydney and Melbourne, where prices increased by 1.7 percent and 1.2 percent during February respectively.

Over the past twelve months, prices in Sydney and Melbourne have risen by 10.9 percent and 10.7 percent respectively.

Not surprisingly, major sub-markets which are experiencing particular heat at the moment are concentrated in these two capitals.

In terms of price movement over the past twelve months, the five leading sub-regions are Melbourne – Inner East; Sydney – Baulkham Hills and Hawkesbury; Sydney – Inner West; Sydney – Ryde and Melbourne – Inner.

Home values in each of these subregions are up by between 13.7 percent and 18.3 percent over the past year.

Prices also continue to rise in Hobart and parts of Tasmania – further exacerbating affordability challenges there.

Prices in Hobart rose by 0.8 percent in February and are up by 5.0 percent over the year.

Those in Launceston/North-East Tasmania, South-East Tasmania and West and North West Tasmania have increased over the past year by 9.0 percent, 8.9 percent and 7.3 percent respectively.

CoreLogic head of Research Tim Lawless said the recovery in the market is being driven by greater borrowing capacity and a low cost of debt.

Nevertheless, he says further price growth in markets such as Sydney, Melbourne and Hobart is likely to be constrained in the immediate term by affordability concerns.

Within these markets, he says demand will likely shift toward middle and outer-ring suburbs or toward cheaper price points within the medium to high-density sector.

Speaking about the coronavirus, Lawless said this could have an impact over coming months.

“A more significant downturn in consumer sentiment related to the coronavirus outbreak could become a determining factor that impacts the market over coming months,” Lawless said.

“While housing demand is now relatively insulated from a downturn in foreign buyers, the economic impact on key export sectors such as education, tourism and commodities is likely to result in weaker economic conditions and lower consumer sentiment.

Consumer sentiment readings are already low, and a further deterioration could see housing market activity start to slow.”