Regulators are closely monitoring the housing market as it continues to thrive amid favourable conditions, according to the latest economic insight by CommSec.
Ryan Felsman, senior economist at CommSec, said the Reserve Bank of Australia (RBA) flagged the potential challenges of the rising dwelling values in Australia.
March figures from CoreLogic showed that national dwelling prices have hit its highest monthly growth in 32 years at 2.8%.
"Soaring home prices have also been accompanied by surging home loan finance commitments and council building approvals, fuelled by record-low mortgage rates and government housing stimulus measures," Felsman said.
In its Financial Stability Review, the RBA noted that housing market has picked up notably in recent months and is being "watched closely" by regulatory authorities.
"If housing prices continue to rise as the end of stimulus payments slows household income growth, this will present renewed challenges for housing affordability for lower income households," the central bank said.
However, the RBA said that the improvement in lending standards in Australia from 2010 onwards have helped ensure borrowers were well placed to weather the economic shock over the past year.
In a separate analysis, Tim Lawless, research director of CoreLogic, shared the same sentiments about the housing market. He said the cheap mortgage rates, improving economic conditions, and a confident consumer sector have boosted the housing market over the past six months.
However, Lawless said it is unlikely for the RBA to change its monetary policy stance soon given that unemployment and inflation targets are still years away. Still, Lawless believes that a new round of macroprudential policies is looking increasingly a matter of when, rather than as a response to the housing market boom.
"Tighter credit conditions would probably have an immediate dampening effect on housing market activity, while continuing to let record low interest rates support the ongoing economic recovery," he said.