Dwelling values in Sydney have surpassed their previous peak in 2017, hitting a new record high, according to the latest figures from CoreLogic.

Tim Lawless, executive research director at CoreLogic, said Sydney has been reporting strong capital gains in housing values in recent months. In fact, Sydney home values have risen by 5.7% after hitting a floor in October.

“The recovery trend in Sydney following the 15.3% decline from July 2017 to May 2019 was interrupted by COVID-19, with housing values falling by 3.0% through the worst of the pandemic," he said.

February data showed that Sydney values have increased by 2.8% from last year to $895,933.

While this is good news to homeowners who wish to take advantage of higher house values when refinancing, it remains a challenge for many would-be buyers who are planning to break into the market.

"With household incomes expected to remain subdued and stimulus winding down, it is likely affordability will once again become a challenge," Lawless said.