Sydney house prices lead the charge as Australian housing values continued to increase throughout 2015 taking the average value across the capital cities almost 10% higher for the financial year. The rate over the second half of the financial year for capital cities was 5.1% compared with the first half which was 4.5%. This highlights the momentum gathered in the housing market during 2015, particularly after the RBA reduced the cash rate to a record low in Australia of 2% , pushing capital gains higher.Sydney house prices increased dramatically after the RBA cut the cash rate in February. There was an instant buyer reaction across the Sydney and Melbourne housing markets where auction clearance rates surged back to levels not seen since 2009, capital gains once again accelerated and we are now seeing Sydney and Melbourne homes selling in record time. Sydney homes are selling in just 26 days and Melbourne homes are selling in 32 days.The strength in the housing market has been diverse over the year, while Sydney and Melbourne have seen dwelling values increase by 16.2 per cent and 10.2 per cent over the financial year respectively, every other capital city has seen growth of less than 5 per cent and dwelling values are down over the year in Darwin (-2.9 per cent) and Perth (-0.9 per cent). Since property values started rising in May 2012, Sydney dwellings have seen a 43.1% surge in values and Melbourne values are up by 25.9%. Perth, dwelling values are currently up 12.8% over the cycle which represents the third highest growth rate across the capitals. Brisbane’s property market has shown the fourth highest rate of growth at 12.4%, followed by Adelaide, 10.4%, Hobart 9.6%, Darwin 8.9% and Canberra 8.8%.Over the financial year, houses have clearly outperformed units in the capital gains stakes. House values were 10.4 per cent higher across the combined capitals index while unit values increased by a much lower 5.6 per cent. Gross rental yields decreased again in June due to dwelling values rising at a faster pace than weekly rents. Currently, the typical gross yield for a capital city house is recorded at 3.5 per cent, which is equivalent to the record low last recorded in 2007. Melbourne continues to hold the unfortunate title of the lowest yielding capital city, but if current trends continue, it won’t be long before Sydney overtakes Melbourne due to the substantially higher rate of capital gain in the face of comparatively low rental appreciation. Brisbane is now recording the highest gross rental yield for apartments, at 5.4%, and the only capital city where gross rental yields have improved over the year has been Hobart which is now starting to rival Darwin as the highest yielding capital city for houses.Looking forward to the next financial year, it is difficult to imagine Sydney house prices maintaining such a rapid pace. Not only is affordability becoming a challenge for many sectors of the market, but yields are substantially compressed and rents are hardly moving.