A report has confirmed that Sydney remains the most expensive city in Australia to live in.

The Federal Government has today released its annual State of Australian Cities report.

The report from the Department of Infrastructure and Transport shows that a home near central Sydney is worth five time more now that it was in 1986.

A home 50 kilometres from the central business district has doubled in value over the same period.

Almost of half of Sydney's unit dwellers are now families with children.

The report suggests the size of Australian homes might be one reason housing is not more affordable, along with lack of supply.

It shows Australia now has the largest average house size in the world, surpassing even the Unite States.

Between them Sydney and Melbourne have absorbed 40 per cent of Australia's population growth since 2001.

That is despite population growth in Perth, Brisbane and Darwin outstripping both.

The report says Melbourne's population grew by 1.7 per cent to 4.17 million last year, from just over 3.5 million in 2001.

That surpassed Sydney's population growth of 1.1 per cent, jumping from 4.13 million people in 2001 to 4.6 million in 2001.

The report says Newcastle is Australia's seventh largest city with a population of 540,000, while Wollongong came in ninth with 288,000 people.

Growth in both was sluggish though.

Sydney remains the country's most visited destination, both for domestic and international visitors.

Overall the report shows that cities across the country have ageing populations that are working beyond retirement age.

The cities have also increased in temperature, with all two degrees hotter than they were in 1952.

Extreme weather is expected to increase, with severe hailstorms among the dangers for Sydney.