Aussie house prices are 'going nuts again'

House prices are going nuts again, according to Australian Financial Review columnist Chris Joye.

He noted home values across the five capital cities have expanded 9.8 per cent over the last year with "staggering" 4 per cent capital gains in the past three months alone.

The correction called by so many in late 2015 has been superseded by an elongation of one of the biggest, and certainly most dangerous, house price cycles in history, Joye suggested.

Over the 12 months to mid-May, Sydney and Melbourne prices have leapt by a stunning 12.4 per cent and 12.7 per cent, respectively.

Dwelling values in Brisbane and Adelaide have increased 7.4 per cent and 5.6 per cent over the last year which, according to CoreLogic RP Data, which Joye noted while seemingly modest, is 3.5 and 2.7 times the pace of wages growth.

Joye advised the Reserve Bank of Australia's decision to further crush the cash rate to another record low of 1.75 per cent in May had compelled his upward revision to his 2016 forecasts.

In December his nominal appreciation forecast was of 2 per cent to 4 per cent which assumed an unchanged cash rate.

"Given current yield curve expectations for a second cut in 2016, my central case is house prices run at three to five times wages, which represents capital growth of between 6 per cent and 10 percent.

"We are, therefore, in completely unchartered territory that means the risk of policymaking errors apropos asset price bubbles is higher than it has been before.

"So if you are buying a house, you would be well-advised to embed a chunky margin of error in price terms to hedge against such hazards," said Christopher Joye who is a director and shareholder in Smarter Money Investments, which manages fixed-income investment portfolios.