Property values in Sydney rose strongly during the July quarter notching up an impressive 6.56% growth in median house prices to $593,000 according to the latest data from Residex. Units performed solidly as well with median values climbing by 4.14% to $423,000.

Surging demand in Melbourne lifted median house values by 5.05% to $498,000 while median unit values jumped by 4.62% to $392,000 during the three months ending July.

Units in Brisbane outperformed houses as buyers seek out affordable options. Median unit values rose by 5.62% to $361,000 while median house price grew by a more modest 2.17% to $452,500.

Darwin appears to be cooling with median house price rising by just 3.35% to $475,000. However, demand for units remains strong, lifting median unit values by 5.99% to $373,500.

"The above turnaround in the housing market is truly remarkable," said John Edwards, CEO of Residex. "Sydney in the last 3 months has provided more growth than was achieved in the last 24 months. If we annualise the growth, for example, in Sydney for the last quarter then we have an outcome of 28.9%. This very clearly puts the last quarter's result into perspective. That is, if it continues at this level for a further quarter then we will be in a housing boom during a period of economic uncertainty driven by Government spending and a low RBA interest rate setting," he said.

However, Edwards warns that the speedy recovery presents risks to investors.

"Consumer confidence is good, but too much confidence and over leveraging presents some real issues for Government and the community as a whole."

To counteract these emerging risks, Edwards advised investors to get back to defensive investment strategies such as the ones below:

• Avoid investment areas where there will be potential mortgage stress. That is, stay clear of the First Home Owner Grant territory;

• Don't over leverage. Develop your cash flow needs based on interest rate increases of 1.5%

• Invest in well positioned unit properties which have a price within 10% of the city median value

• Avoid large new development complexes;

• Seek out older properties which allow refurbishing;

• Use our reports to find the best potential investment areas; and

• Finally, don't pay too much for any property.