In addition, a migration-driven population growth, an increasing number of buyers priced out of the more expensive Sydney market and the July elimination of stamp duty for first home buyers, were pushing Melbourne's market faster than Sydney, Dr Wilson said.

"Melbourne is the clear top performer and will continue to stay there," Dr Wilson said. "The jungle drums are still beating pretty loud for a strong result to the end of the year for Melbourne."

Melbourne houses will rise 10 per cent this calendar year and units 7 per cent, while Sydney houses will gain 7 per cent and units 3 per cent, Dr Wilson said.

Median price jump

The national median house price increased by 2.2 per cent over the March quarter and 10.2 per cent year-on-year, reaching a new record high of $801,204. The national median unit price rose 1.2 per cent in the March quarter and 5.4 per cent from a year ago to $558,824.

The picture in other cities was mixed. Brisbane house prices fell 1.4 per cent from December to a median $532,504. Apartment prices fell 3.8 per cent after a 0.3 per cent increase in December.

Price falls increased in Perth houses and apartments. In Darwin, however, house prices rose 2.9 per cent after falling 6.1 per cent in the December quarter.

The strength of Melbourne apartment prices was surprising and indicated that despite falling in value, the largely overseas investors who had purchased them were holding on to them – neither selling nor putting them out into the rental market – Dr Wilson said


"One development is we're not seeing any volume of sales in the CBD market," he said. "That market is in a holding pattern, particularly from international investors who've purchased. They're not putting them onto the market for rental or sale and the growth is coming from suburban units."

Domain's separate report into regional house prices showed that areas in northern NSW were the best performers in the March quarter.

Clarence Valley prices – around Grafton – rose 4.9 per cent from December, while Tweed jumped 6.6 per cent quarter-on-quarter.

"It's cashed-up Sydney buyers," Dr Wilson said. "A mix of sea changers, retirees, and holiday home purchasers."