If August’s house price growth rate in Sydney and Melbourne is maintained for the next year, these markets will have risen by a staggering 19.2 per cent and 16.8 per cent respectively, retracing all the falls it experienced over the past two years – and then some.

Such an outcome would propel our two largest property markets back into bubble territory, which would set off the same set of alarm bells as last time around. Property investors would be off to the races and bank profits could receive a shot in the arm.

But for struggling first home buyers it would be a disaster.

Sydney and Melbourne house prices surged in August. Peter Rae

That said, economists are not predicting an outcome this extreme, but those who had taken a more conservative stance and called out a very modest rebound will need to reassess their models.

Meanwhile, there was no response from sharemarket investors in our big four banks when the August property price data was released on Monday – the big four all fell in line with the broader market in the morning. Westpac was the only bank to close up marginally.

While the upward price trend is clear and arguably established, the rates of change month to month can be more lumpy than linear.

We should get a clearer picture about the sustainability in house price rises when the spring auctions kick off this week. This is traditionally the busiest time for residential property auctions.

But what is clear is that there has been a leg up in the rate of growth in the month of August. Nationally, prices rose by 1 per cent across capital cities, by 1.6 per cent in Sydney and by 1.4 per cent in Melbourne.

There are several factors that have fed into this buoyancy but the most significant appears to be the outcome of the federal election in May, which put an end to fears about negative gearing tax implications around property investment.

Two interest rate cuts in recent months combined with the expectation of more to come has also fed into the positive sentiment.

Given interest rates were already at historic lows before the latest cuts, property buyers could be encouraged by a view that rates will remain low for longer.

This explains why the take-up in fixed rate loans is decreasing relative to the take-up in variable rate home loans.

When regulatory relaxation of the 7 per cent mortgage serviceability test and some recent tax cuts are added to the mix there are plenty of ingredients to push up residential prices.

But you won’t find any sensible economist or even a decent student of history suggesting Sydney and Melbourne prices will be up anywhere near 16 or 19 per cent.

Firstly, because the volume of houses being offered for sale is more of a trickle than a flood.

In other words, the sample size is too small from which to extrapolate anything too meaningful.

To use the sharemarket as an analogy: if the All Ordinaries index was higher just because BHP and Rio shares had a huge price rise, the index would not be reflecting the conditions in the broader market.

To be sure auction clearance rates have also picked up significantly relative to a year ago. But this can also reflect the fall in inventory of house stock on the market.

And secondly, homeowner credit growth remains weak – albeit picking up slightly. In the latest July figures there was a 0.5 per cent improvement in owner occupier credit growth but a 0.1 per cent decline in home investor credit.

It will need to improve significantly for house values to continue to rise at the rate set in August.

The previous house price boom that began in 2011 also coincided with falling interest rates but featured a dramatic easing in bank lending standards.

This time around bank lending standards have tightened rather than eased and their serviceability tests and stricter regard to assessment of a borrower’s income will lower the ceiling on housing credit growth.

Banking analysts are generally taking a very conservative view on bank credit growth and are not factoring in a meaningful pick up.

Having said that Australia has an obsession with home ownership, and fear-of-missing-out (FOMO) can create its own momentum.