Australia’s housing market is experiencing its strongest run in three years, with Sydney emerging as the engine of growth for the nation.

But rising prices are raising fresh concerns about worsening housing affordability after the limited breathing room delivered by the recent slump is being wiped away.

Leaving the market: First home buyers now make up 13.7 per cent of loans, the lowest since 2004. Credit:Louie Douvis

Affordability constraints are increasingly being flagged as a new danger area, particularly in the country’s east.

The number of finance commitment for first home buyers has plunged nearly 22 per cent in the last year despite the record low interest rate, according to the Bureau of Statistics.