A record number of homes built in Sydney over the past year is struggling to address the city's housing affordability crisis, as the state and federal government remain at loggerheads over the best policy approach for addressing the problem.

More than 31,000 new homes were built in Sydney in the 12 months to October, the highest annual number of new homes in over four decades, according to new data released by the Department of Planning on Thursday.

But as median house prices in Sydney continue to hover around $1 million, the new data is likely to fuel the debate over the need for federal government intervention to address housing demand through taxation reform.

The Reserve Bank said in its monthly board minutes this week that parts of the property market were back on its radar as they were "strengthening". Investors have been boosting the market attracted by record low interest rates and negative gearing which the federal government has ruled out changing.