TREASURY agrees Sydney house prices have been growing strongly but says they are not that much out of step with long term trends.

And there’s some sense that this may be easing.

Treasury acting deputy secretary Jenny Wilkinson said housing affordability remained broadly around the average of the last couple of decades.

She told a parliamentary committee hearing on home ownership that trends in investment in the housing sector were cyclical with a strong upward trend now under way for the last few years.

Building approvals increased more than 16 per cent in the year to April 2013. Government forecasts point to a 6.5 per cent increase in dwelling investment this year and next and 4.5 per cent in 2016-17.

“This is going to be a period of quite significant increase in supply in the Australian market,” she said.

Ms Wilkinson said there was a variation in price growth across different cities.

She said price growth had been concentrated in Sydney and to a lesser extent Melbourne. But across Sydney, subdivisional data show slowing price growth from mid-2014, with constant growth across subdivisions in Melbourne.

“That’s consistent with a general sense which is that there is some pressure coming out of the market in both Sydney and Melbourne,” she said.

The ratio of dwelling price to household disposable income increased in the late 1990s and early 2000s, coinciding with low inflation and deregulation of the financial markets.

Since 2002, that ratio too had been broadly stable.

“This ratio has picked up a little over the last year but it remains around the average level it has been sitting for the last decade or so,” she said.