Six factors Australians blame for high property prices

A new study conducted by Galaxy Market Research on behalf of State Custodians revealed the six factors Australians blame for the high property prices in the country’s biggest capital cities.

While respondents across various age groups couldn’t agree on what caused the boom, foreign investment was seen as the biggest culprit for high house prices. Fifty-nine percent of respondents across all age groups believe that foreign investment was the main cause of the housing boom.

Among Generation Y, 49% believe that foreign investment was the main cause of the housing boom. This percentage increases among older age groups. Fifty-four percent of Gen X respondents, 66% of Baby Boomers, and 72% of those aged 65 and older blame foreign investment for the housing boom.

Respondents across the various age groups listed the following five factors as also contributing to the housing boom:

• overpopulation (42%)
• domestic property investors (41%)
• high transaction costs (35%)
• low interest rates (32%), and
• low supply of houses for sale (28%).

Foreign investment was targeted in the federal government’s 2017-18 budget. Among other changes, foreign investors who keep their properties vacant for at least six months will face a levy of at least $5,000 per annum. As for new developments, only 50% of stock can be sold to foreign buyers.

Low interest rates likely had a bigger impact than foreign investors

While it’s easy to blame foreign investors for skyrocketing house prices in Sydney and Melbourne, many experts says low interest rates likely had a bigger impact than foreign demand for Aussie real estate.

Hans Kunnen, chief economist at Compass Economics, agreed that foreign investors shouldn’t be blamed for rising house prices in the southeastern capitals. However, he did say foreign investors could be causing apartment property prices to rise. “Foreign investors buy apartments more than houses and when you’re looking at house prices it’s not foreign investors pushing prices up,” he said.

Kunnen also noted that house prices were rising far more quickly than apartment values, suggesting that other forces were responsible for Sydney and Melbourne’s affordability crisis.

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