But that has not deterred buyers, with a record 229,438 new homes approved in the past year, according to the Australian Bureau of Statistics.

While the large developers have been warning that the double-digit rate of the price growth will decline, the weak Australian dollar, an undersupply of new homes and a strong local economy are behind Sydney's accelerating values, and to an extent Melbourne's as well, according to Knight Frank's Prime Global Cities Index.

The index monitors and compares the performance of prime residential prices across key global cities.

It says that in the year to September, Sydney recorded an increase of 13.7 per cent, while Melbourne sits in fifth place with an annual increase of 9.4 per cent. The report attributes a shortage of supply and strengthening local demand alongside foreign interest as the reasons behind this strong performance.

This will benefit the residential-focused real estate investment trusts of Stockland, Mirvac, Lend Lease and Frasers Australia.

While regional home price data is only available to September, it is clear that the strength in the Sydney market is spreading. Regional NSW home prices are up 8 per cent over the year – the fastest pace of price growth in 5½ years.

The analysts at CLSA said that after Mirvac's quarterly report to the end of September they felt more comfortable on settlement risk and valuations.

"Mirvac's first quarter for the 2016 financial year update gives us confidence in its full-year guidance and medium-term outlook and growth. Another record high contracts on hand of $2.3 billion and higher volumes and margins has defied recent softness in residential markets, reflective of Mirvac's high-quality, well-located products," the CLSA analysts said.

UBS analysts said Mirvac has a number of medium/high-density projects, particularly in the NSW market, that are performing well and have embedded margin. Mirvac's latest project is the Pavilions at Sydney Olympic Park.

"We have a positive outlook for residential given share price and our expectation of stronger-for-longer cycle, fuelled by rate cuts, infrastructure spend and continuing population growth," UBS analysts said.

Michelle Ciesielski​, director of residential research, Australia at Knight Frank said the price growth shown in Sydney and Melbourne on this quarter's index is due to a number of factors.

"One factor is the lower Australian dollar, which has influenced the number of expats buying back in Sydney and Melbourne, taking advantage of buying a prime property in these ideal conditions – ready for when they eventually return to Australia.

"Since the Significant Investment Visas, and more recently the new Premium Investor Visas, were introduced in July, foreign money has been flowing into Australia through offshore buyers looking to secure a trophy asset on the waterfront or in one of the cities' more exclusive suburbs," Ms Ciesielski said.

Looking globally, Kate Everett-Allen, partner, residential research at Knight Frank said Prime Global Cities Index's annual rate of growth has slowed significantly from 7 per cent two years ago to 1.9 per cent.

Ms Everett-Allen said 73 per cent of cities recorded positive annual price growth in the year to September, down from 91 per cent two years ago.

"Singapore was the weakest performing prime market tracked by the index for the seventh consecutive quarter, but the rate of annual decline has slowed from minus 15.2 per cent at the end of the second quarter to minus 7.9 per cent this quarter," she said.

"Analysis by world region highlights that Australasia leads the Prime Global Cities Index, with an average annual price growth of 11.6 per cent, followed by North America at 8.5 per cent. Europe has entered positive territory this quarter with an increase of 0.8 per cent. However, performance here varies from an increase of 9.4 per cent in Monaco to minus 5.1 per cent in Zurich."