Last June, analysts who were long predicting a cooling in Sydney and Melbourne’s overheated property markets were finally given some evidence to back their forecasts.

For three consecutive weekends, the clearance rate in Sydney was below 70%, a trend  heralded by some as an indicator that buyers were no longer willing to meet sellers’ expectations. Are softening prices a sign of a cooling market

Some experts disagree. Some experts disagree. According to them, this oversupply has led to a drop in demand. They claimed that real estate was still a growing industry despite its oversupply. Sydney’s median house priceThe total was $1.1 Million in September 2017.

The rise in home values isn’t limited to the inner cities. A Leichardt three-bedroom house was purchased by an investor for $1.61m in March. These modest homes were originally built to accommodate working class people—once the lifeblood of the inner city suburbs

The market is being affected by the recent housing boom. In five years, Sydney’s houses have shot up in value by 75%, Melbourne’s by 55%. It has helped property owners become millionaires, as well as permanent renters to the less fortunate.

Matt Grudnoff, senior economist at The Australia Institute, notes that while median and average incomes have “slowed dramatically” in recent years, house prices have “raced ahead”.

In February 2017, the growth rate was 18%. This growth dropped to 11% just a few months later. There was some improvement but not many people anticipate a crash.

“The expectation is for a very stable year with minor price fluctuations linked to the balance between supply and demand,” said John Cunningham, CEO of the Real Estate Institute of New South Wales (REINSW).

So who—or what—is to blame for soaring prices in the east coast capitals? Others point out that high construction costs are the culprit, but negative gearing and the increasing number of people are also major factors. For the average Joe, it’s wealthy foreign investors, many from the Asia-Pacific, driving up house prices.

“We see a lot of hostility to Chinese buyers,” said Dallas Rogers, professor at the University of Sydney, who led an investigation into the link between Chinese property buyers and rising property values in the Harbour City.

Rogers’ study found no link between Chinese investment and price surges. Property prices have continued to rise in spite of restrictions on foreign buyers since 2014.

The Turnbull government as well as state governments tried to find ways to slow down the process of allowing aspiring homeowners to enter the real estate market. 

Grattan Institute developed a list and evaluated the effectiveness of each solution last year. You can also use superannuation for purchase. Critics claim that this strategy could leave older and younger generations with insufficient savings to retire. Another possibility was for government contributions to housing deposits to be paid back together with equity growth realized after the sale. While this would enable some people to buy homes it won’t reduce prices.

“Trying to identify one factor or the other is difficult,” said Trent Wiltshire, associate at the Grattan Institute. “There is strong population growth and low interest rates. The problem is that demand outstrips supply and the construction boom is not servicing the main areas of demand, where families wish to live.”