''Six months ago the concern was we would see unhealthily large declines in asset prices, but clearly that threat has passed,'' Dr Richards told a conference on housing affordability.

''When the price of housing rises, higher-income households tend to benefit at the expense of lower-income households,'' he said. ''As a nation, we are not really any richer when the price of housing rises.''

A big contributor to the problem was massive population growth at a time of stagnation in house building. While Australia's population grew by 340,000 a year over the past five years (a jump of 40 per cent over the preceding five years), the number of new houses being built fell more than 3 per cent - from 155,000 a year to 150,000.

Dr Richards said one reason for the housing shortfall was the difficulty and cost of developing land - typical lots on city fringes cost more than $150,000. He said governments should do more to improve public transport and infrastructure to encourage development.

The conference also heard fresh claims that grants for first home buyers were exacerbating the affordability crisis. Louis Christopher, head of property research firm SQM, said the grants had encouraged price inflation at the lower end of the market.