Housing prices continue to surge

The seasonal rebound in housing prices continued last week, led by a surge in Melbourne.

RP Data's weekly roundup of auction results shows the average price for homes auctioned in the mainland state capitals rose by 0.8 per cent in the week to Sunday, to be up by 11.1 per cent from a year ago and by 4.9 per cent for 2014 so far.

Comparable figures from a year ago were a weekly rise of 0.3 per cent, an annual gain of 4.1 per cent and a year-to-date increase of 3.8 per cent.

By these measures the market has more momentum at the moment than it did coming out of the early-winter price lull this time last year.

Sydney still leads the capitals with annual growth of 16.1 per cent, but the surprise package this year has been Melbourne, where prices have risen by 11.4 per cent over the year and by 7.0 per cent in the past month alone.

Weekly auction clearance rates averaged a high 68.7 per cent, although the number of auctions 1,421 last week, while up from 1,383 the week before, was still well down from the last week of June when RP Data counted 1,970 auctions.

Demand remains high and is eating into the reduced supply of homes on the market at this time of year.

Even aside from the seasonal fluctuations, the number of homes on the market has been on a downward trend since early 2012.

RP Data said there were currently 92,662 properties listed for sale last week, including 21,511 new listings, compared with 105,558 total listings and 22,044 new listings a year ago.

Investors are always wondering how long the current surge in prices will last, but a research paper from RBA economists on Monday will probably not help much.

The paper, titled "Is Housing Overvalued", concluded that it wasn't, but that conclusion was based on an assumption that prices continue to rise at the long-run average of inflation plus 2.5 per cent.

But that doesn't tell us whether that assumption will turn out to be correct, which is exactly what investors would dearly love to know.