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What's behind rising Australian property prices?

Australian property prices have risen significantly over the past few years, reaching a record high in early 2017, while new figures show that the average house price in Sydney is now ten times the average person's salary.

But what exactly is causing this dramatic increase in prices?

Galaxy Market Research has conducted a survey on behalf of State Custodians, asking Australians what they think is fuelling the house price boom, with the majority believing that costs are being driven up by an increase in investment from overseas, Domain reports.

Almost half (49 per cent) of millennials thought foreign investors were to blame, along with just under three-quarters (72 per cent) of over-65s.

The Australian government revealed in its 2017 Budget last week that new rules are to be introduced regarding foreign property investment, which will mean extra tax payments for investors that do not agree to put a certain number of the homes they purchase in a development up for rent to help out the country's wider housing sector.

However, Michael Sloan, founder of The Successful Investor, commented: "It's easy to blame foreign buyers for increasing house prices, but that is not the reason property prices are increasing. Anyone who can buy at these low rates is buying and this puts more buyers in the market and that pushes up prices.

"Buyers don't like to see prices rising, but property prices have stayed ahead of inflation for decades, so that means it is a normal part of the cycle."

The second biggest factor that Australians believe is causing rising house prices is overpopulation, closely followed by domestic property investors adding to their portfolios, showing that it is not just foreign investors who are contributing towards the boom.

High transaction costs are also thought to be pushing up average property prices, as are low interest rates.

What's more, the relatively low number of homes currently for sale is believed to be playing a key role in driving up house prices, as the property market needs to be able to make a competitive amount of money from the level of stock it has to work.

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