A Nobel Prize laureate is the latest to warn Sydney and Melbourne's real estate markets are showing every sign of being in a dangerous price bubble.

Professor Vernon Smith, who was honoured in 2002 for his work in experimental economics, said Australia needs to learn lessons from the subprime mortgage bubble in the United States which sparked a housing crash and ultimately the global financial crisis.

"Sydney real estate is growing faster than your other cities and Melbourne has a similar experience," Professor Smith told the ABC.

While regulations in Australia do not allow distressed borrowers to simply drop off their house keys to a bank, which accelerated the US crash, Professor Smith warns some property investors could be burned if the property bubble bursts.

"In so far that it's investors speculating and wanting to resell at a profit, some of them are going to be disappointed when things turn around," Professor Smith said.

"But free economies involve losses. If you're not willing to take the losses you can't really brag about the gains.

"Prices go up and to some extent that will include some speculation. But a good bit of this might just be normal functioning of the capitalist economy."

Professor Smith is visiting Sydney as a guest of the Macquarie Graduate School of Management (MGSM) to speak about global property prices and a potential property "bubble" in Sydney and Melbourne.

While warning about risks of property speculation in Australia, Professor Smith believes the nation can avoid the more severe impact of the US housing crash in 2007.

"Households then had a severe balance sheet crunch, many were living in homes where they owe more than the home is worth," Professor Smith said.

"You don't feel like spending money because you're in debt reduction mode and the banks are in trouble because they're holding those bad assets.

"If you can avoid that sort of thing then you've got a softer possibility for adjustment when prices come down."

Dangerous debt: 'We learned it in the 1930s but we forgot'

The latest warning about a property bubble in Sydney and Melbourne follows moves by major banks to increase rates on property investment loans and interest-free loans.

Smaller banks are also feeling the pressure from the banking regular APRA (Australian Prudential Regulation Authority) to lift capital requirements as a bolster against potential shocks.

AMP Bank will no longer accepting new, or assessing existing, property investor loan applications.

The wealth management giant said the suspension of new investment lending is expected to last until later this year.

Professor Vernon Smith, who studied the lead up to the US housing crash and its aftermath, said Australia would be wise to learn lessons from the US experience and heed the advice of local regulators to reduce exposure to bad loans.

"Guard against allowing people to buy homes with other people's money, in particular bank money, because it exposes banks so seriously," Professor Smith said.

"We learned it in the 1930s (during the Great Depression) but we forgot it - it isn't that we've never been there."

Professor Smith also worries that the concept of short memories is getting shorter when it comes to the genesis of the global financial crisis.

"Political memories and economic memories can be very short," he lamented.

"When times are good no one wants to be remember what can be the result of the good times if they're done to excess."

Follow Peter Ryan on Twitter @peter_f_ryan and on his Main Street blog.