The majority of respondents to a major Australian property survey believe the country’s two biggest residential markets are either in or entering a property bubble.

Results from The Australian Property Institute’s (API) 34th Property Directions Survey show that 58% of the valuers, fund managers, property financiers and property analysts who responded to the survey believe Sydney’s residential market is in or entering a bubble, while 53% believe the same for Melbourne.

Conversely, only 30% of respondents believe Brisbane’s residential market has entered a bubble.

While most respondents have labelled Sydney and Melbourne as bubbles, the majority don’t think they will burst in the immediate future.

“Fifty-three per cent of respondents believe that Sydney residential property prices will continue to rise for either six or 12 months with 26% stating 18 months,” API NSW division senior vice president Ian Muir said.  

“Respondents are more certain in their predictions for Melbourne residential property with 76% seeing prices continuing to rise for six or 12 months”.

Muir said according to the results of the survey respondents believe Sydney and Melbourne prices will have passed the top of the property cycle by 2017, but prices will sit near the top for some time, while Brisbane prices are expected to near to the top

of their cycle in the same year.

Respondents to the survey were unified in identifying interest rates as either a significant or very significant driver of demand for residential property in Sydney, while 95% pointed to foreign investment as being significant or very significant.

In Melbourne, 94% of respondents see foreign investment as a significant or very significant driver and 87% sighted low interest rates as significant to very significant.

For the Brisbane market, 88% of respondents believe interest rates are putting significant upward pressure on prices, while 44% believe foreign investment is doing the same.

In Perth, 79% of respondents believe interest rates are playing a major role in price rises, while only 29% see foreign investment as a key factor.

Muir said the large majority of respondents predicted little change in regards to inflation levels or interest rates over the next 12 months.

“It’s a different story with foreign investment, with a small majority of respondents believing levels will remain similar for the next six months,” he said.

“Respondents are less certain over the next 12 months, but most still see foreign investment at similar or higher levels.”

Other factors listed by respondents as potential impacts on the Australian property market included slowing Chinese economy, an increase in the unemployment rate and potential changes to foreign investment or immigration rules.