House price bubble brewing down under?

A house price bubble may be brewing Down Under.

Australia is the latest in a line of countries that are seeing property values surge, spurred on by low borrowing costs. That combination, alongside a short housing supply and strong demand from investors, is driving prices higher, with values in some areas of Sydney trebling in the past 15 years.

Indeed, city has seen prices soar 13 per cent in the 10 months to October 31st 2013, according to RP Data-Rismark figures, hitting a new record high. Foreign investors also joining the buying spree, according to the National Australia Bank, whose survey found that overseas buyers accounted for 12.5 per cent of sales in the third quarter of 2013 compared to 5 per cent during much of 2011.

“It’s easy to see how bubble-like conditions could emerge,” Saul Eslake, chief Australia economist at Bank of America Merrill Lynch in Melbourne, told Bloomberg. For now, though, he says that the increase is not accompanied by a worrying rise in lending or construction.