Perth, WA - Strong demand from property investors combined with record low interest rates and a growing economy have contributed to a surge in property prices.

Sydney and Melbourne saw the most significant increases over the last 12 months with a 16.2% and 11.7% growth respectfully. Other capital cities saw increases as well but only in the single digits including Adelaide (5.9%), Perth (3.5%), and Canberra (1.4%).

The Reserve Bank of Australia (RBA) has issued warnings in its Financial Stability Review that measures need to be taken to control the booming market. A sharp decline in property values could have strong repercussions in the broader economy for households across the country.

Of particular concern is the "unbalanced" number of loan approvals for property investors compared to first homebuyers. Reserve Bank assistant governor Malcolm Edey said, "The rate of growth of investor finance is significantly outpacing the growth in household incomes. Loans to investors currently account for close to 50 per cent of new housing loan approvals."

The central bank is concerned that the soaring prices could amplify the property price cycle and pose a risk to the economy. As a result, the RBA is seeking to implement measures that could tighten lending practices to investors and is likely to be revealed in the next few months.

Measures that are likely to be taken including tightening lending practices to investors and increasing the interest rates. The intention of these measures would be to slow the housing price growth and prevent values from sharply declining.

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