Fears of a bubble in Australia's property market have increased since the Reserve Bank of Australia (RBA) cut interest rates to a fresh record low last week, but the central bank may not be solely to blame.
House prices down under appreciated 23 percent over the past two-and-a-half years and are forecast to increase by 8 percent this year, according to HSBC. Record-low mortgage rates stemming from the RBA's accommodative policy stance will likely spur the rise, it said, with more rate cuts widely expected.
But it's not just interest rates at play; HSBC believes overseas investment in residential real-estate will also drive prices this year, led by Chinese buyers in particular.
"Low interest rates are the main driver of the [housing] upswing, although foreign demand could give it a further boost," said HSBC economists in a report on Tuesday.
While China has already been the top source of foreign investment in Australian real estate in recent years, mainland demand is expected to increase as much as 20 percent in 2015, according to recent data from Chinese property website Juwai. The firm tips Australia as a top investment destination for Chinese buyers, second only to America.
"Foreign demand has been rising, reflecting a global search for yield and an on-going trend increase in foreign interest in the local housing market, particularly from China," HSBC added.