Rising property prices in Australia, deemed one of the most expensive property markets in the world, have reignited worries over a bubble, but local residents and strategists remain unconvinced.
Prices in Australia have more than tripled since 1997, as low interest rates, high incomes and growing Asian demand worked to propel prices higher. There was a brief period of respite between 2011 and mid-2013 when prices fell 4 percent, but in recent times they have picked up again, rising at their fastest pace in three years in 2013 at near 10 percent.
This week Sydney and Melbourne were branded the fourth and fifth most unaffordable cities to buy a house out of 360 metropolises profiled in the Demographia International Housing Affordability survey published.
A two bedroom apartment in central Sydney, for example, can fetch AUS$1.25 million ($1.1 million) according to property website Domain.
Rebecca Lipscomb, a 32-year old nurse from Sydney, told CNBC many of her peers are being forced to rent because house prices in the more desirable suburbs of Sydney are beyond what they can afford.
"One or two generations ago the Aussie dream was to have a house, but that's changed now. People have to move to smaller apartments, or away from central Sydney, or even overseas," she said.
"You just don't get a lot for your money. Young people have to turn to their parents for help. Unless you are in a couple, and are both on good salaries, then it is very hard to buy."
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According to Nick Maroutsos, founder and managing director at Kapstream Capital, the pace at which Sydney house prices have spiked has been unsettling. As of January 24, house prices in Sydney rose 13.08 percent over the past 12 months, according to the RP Data-Rismark house price report, while Melbourne saw a 10.82 percent rise and Perth, a 7.63 percent jump.
"Is it a bubble? Possibly, which is another reason why the Reserve Bank of Australia will be reluctant to cut interest rates," he said. "First time homeowners are being priced out of the market and prices continue to head north. It is quite unsettling in that after a brief plateau the appreciation continued, but demand is high and supply is low."