Most explanations for house price rises are "just a sideshow" given the obvious supply shortfall and the "small effect" foreign buyers and SMSF purchases are having on the market.
The two main drivers, according to a new report, are the shift to low interest rates and lack of supply due to restrictive land supply policies, and high stamp duty and infrastructure costs.
The Australian House Prices - A Bit Too Hot In Parts report released by head of investment strategy and chief economist for AMP Capital Shane Oliver said his assessment is that the Australian property market is not at the "bubble extreme" it was at a decade ago, but danger signs are emerging.
Mr Oliver said after a cooler period during the first half of the year the property market seems to be hotting up again and danger signs are appearing.
“The proportion of housing finance commitments going to investors is now back to around the 50 per cent high seen a decade ago, suggesting the market is becoming more speculative … there are signs that homebuyers are starting to extrapolate recent strong price gains into the future, which is very dangerous,” Mr Oliver said.
“We can expect increasing jawboning from the RBA with a rising likelihood of credit growth restrictions for investors if it doesn’t slow soon… the ratio of house prices to incomes and rents in Australia are 23.5 per cent and 40.9 per cent above their long-term averages respectively, which is at the higher end of OECD countries.
“National average house prices rose at an annualised 16.8 per cent pace over the three months to August, according to RP Data. The proportion of housing finance commitments going to investors is now back to around the 50 per cent high seen a decade ago, suggesting the market is becoming more speculative.”
Mr Oliver added the fact that reality TV program The Block is leading the ratings means there is strong community interest in the property market.