In many ways, Australia remains a blessed and lucky country. This past April, Australia recorded 26 years of growth without a recession. Despite this, danger signs are ahead, especially for the residential sector.

Stoked by low interest rates and a shortage of housing, Sydney has become the world’s second-most expensive property market, with Melbourne also in the top 10. In April, the median home price in Sydney reached A$1.14 million (US$854,800).

In Sydney and Melbourne, home prices rose at a torrid pace in 2016, before starting to cool over the past few months. According to Knight Frank, median home prices in Sydney jumped 9.3 percent from April 2016 to April 2017, while apartment prices increased 7.8 percent. In Melbourne, median home prices jumped 12.6 percent and apartments 8.6 percent.

Rapidly-escalating values are not new: Since 2012, home prices in Sydney and Melbourne have risen 80 percent and 60 percent, respectively. In the process, homeownership i