While house values are soaring in Sydney, domestic and foreign buyers continue to show interest in the market. If land releases for new dwellings can't keep up with the rate of demand, then growth is imminent.
Sydney house prices soared 14.3 per cent in the 12 months to September 30, according to the RP Data CoreLogic September Hedonic Home Value Index Results. This is well ahead of the combined capitals average (9.3 per cent), placing Sydney at the top of the charts for growth. Melbourne also experienced positive value growth over the same period (8.1 per cent). However, these dramatic rises are concerning some.
Reserve Bank of Australia Assistant Governor Malcolm Edey recently spoke at the Inquiry into Affordable Housing in Canberra, drawing upon points likely to interest those contemplating a foray into property investment, as well as homeowners.
Mr Edey conceded that "the ratio of housing prices to incomes is at the top of its historical range", however this isn't a total disaster for property buyers.
"Over time, this has been more than offset by falls in financing costs, so that the typical repayment burden as a share of income is not particularly high. This of course does not rule out affordability problems in particular market segments or for particular types of households," Mr Edey noted.
The widespread availability and cost of finance was raised by Mr Edey. With historically low interest rates dominating the loan environment, investors and regular buyers have been able to secure loans at favourable rates.
"It is the supply response that determines the extent to which additional demand results in higher prices over time," he said.
"Australia faces a number of longstanding challenges in this area, including regulatory and zoning constraints, inherent geographical barriers and the cost structure of the building industry. There are also obstacles to affordable housing created by Australia's unusually low-density urban structure, though this is gradually changing."
So while house prices are on the rise, it's clear that there's no one single factor that is to blame - or that can remedy - the issue of affordability. With regards to a bubble, the signs of a big "pop" are also somewhat unclear, with arguments for and against and imminent collapse being presented.
Treasurer Joe Hockey recently commented at a conference that Australia fundamentally has a lack of supply in the housing market. However, he denies there is a bubble.
On the other hand, domestic and foreign commentators have said there is a bubble - or that there is one approaching.
UBS global chief economist Larry Hatheway recently commented on the high Australian dollar and its impact on the property market.
According to a September 16 Sydney Morning Herald article, Hatheway said the RBA may need to employ tools - beyond altering the official cash rate - to bat away any "bubble-like conditions in the property market".