Hot housing markets around the country look set to attract a crackdown from the Treasurer Josh Frydenberg.
The Council of Financial Regulators was discussing the surging house prices in a meeting last week and are tipped to bring in new home lending restrictions by the end of the year.
The total value of new monthly home loan approvals is up more than two-thirds over the past year.
"Last Friday, I joined the Council of Financial Regulators to discuss a range of issues including the state of the housing market which is a particular focus for both APRA and the RBA," Treasurer Josh Frydenberg told the ABC in a statement.
"We must be mindful of the balance between credit and income growth to prevent the build-up of future risks in the financial system.
"Carefully targeted and timely adjustments are sometimes necessary. There are a range of tools available to APRA to deliver this outcome."
Mr Frydenberg said early on there were more people buying homes to live in themselves rather than to invest with this property boom compared to last time around.
"A positive feature of this housing cycle compared to that of the last is a higher proportion of first home buyers and owner-occupiers entering the market," he said.
"With Australia's economy well positioned to strongly recover as restrictions ease, it is important to continually assess the appropriateness of our macroprudential settings."
ANZ senior economist Felicity Emmett told ABC that it was risky household debt rather than house prices themselves that regulators are worried about.
"Those sorts of house price rises tend to mean that we see big increases in household debt," she said.
"The regulators are not trying to target house prices per se, but to address the risks around rising household debt."
"The issue for the regulators is not about banking stability, but is about macro stability in the event of an economic shock, when households are more likely to pull back sharply on spending if they are heavily indebted."
Ms Emmett said while raising interest rates would be an effective measure to curb risky borrowing, the RBA was hamstrung in keeping low while trying to recover from COVID lockdowns.