Thanks to declining interest rates and constant demand from investors, the number of Australian suburbs where homes command a median price of A$1 million has surged in the wake of a four-year long housing boom.

According to the latest report from real estate research firm CoreLogic Inc., the values of these suburbs jumped 29 per cent during the first six months of the year. This is more than double over the past three years. Home prices have also surged by 40 per cent from a low in May 2012 due to investors taking advantage of record low interest rates and a favourable tax system for landlords.

“The data highlights the bracket creep that has occurred over the housing growth cycle, and how housing affordability in New South Wales and, to a lesser degree, Victoria, has deteriorated,” said CoreLogic research analyst Cameron Kusher.

Mortgage rates are now at their lowest in more than five decades. However, these surging prices have made affordability a problem for many homebuyers and prompted banks to tighten lending criteria in a bid to moderate the pace of price growth this year.

Just recently, the Reserve Bank cut the official interest rate to a new low of 1.5 per cent, but only a portion of the cut was passed on by Australia’s four major banks to their customers.

Kusher expects more suburbs to pass the $1 million mark in the next 12 months. He said, “While overall housing demand may be slowing a little, we expect that with historic low interest rates, demand for premium housing is set to remain buoyant over the coming year.”