Melbourne's red-hot property market has continued to steam ahead, with median house prices surging by 27% over the past 12 months, according to Australian Property Monitors (APM).

The median house price jumped by $116,917 to $549,980 over the year, while the median unit price added $46,823 to $388,230 - a 13.7% increase.

Sydney also put on an impressive performance, with the median house price climbing by 14.7% to $609,353. Unit prices also grew solidly in the same period, recording a 10.4% gain to $416,910.

Canberra and Darwin continued to rack up strong gains with median house prices rising by 13.9% and 14.5%, respectively.

Brisbane remained at the bottom end, gaining just 9.1% to $451,388 over the past 12 months - the lowest growth recorded by any capital city in Australia. During the March quarter, house prices fell by 0.1%, extending the flat performance during the past three consecutive quarters. Units also lost ground, with median prices dropping by 2.2% to $362,877.

Joining Brisbane in the slow lane is Perth, which managed to rack up a small gain of 1.1% to $519,526 over the March quarter.

Price growth for houses in the most expensive half of the market was nearly double that of the more affordable sector, as it has been for the last three quarters, according to Matthew Bell, economist with APM.

"Prices in the more expensive suburbs have proved to be less sensitive to interest rate rises and the removal of first homebuyer stimulus. This top-end price growth has now moved well beyond a recovery of the price falls that occurred in late 2007 and throughout 2008, and is breaking new ground for most regions," said Bell.

"While growth in the rest of the market has remained positive, rising interest rates are clearly having a more significant effect. Housing finance has now been falling for five months and, historically, price growth has tended to slow significantly six to nine months after finance starts to decline. This means that if past trends hold, house price growth should moderate further in the coming quarters."
Despite this, Bell is expecting continued strong population growth, rising incomes, falling unemployment and very strong consumer and business sentiment to offset the negative impact of rising interest rates.

"On the supply side, new dwelling commencements are still well under levels needed to satisfy current demand, let alone begin to eat into the existing deficit of affordable property. These factors have been crucial in the housing market continuing to rise in value, even as rates have returned to normal levels," said Bell.