Prime Minister Tony Abbott has welcomed increasing house prices in Sydney on the same day the head of Treasury voiced strong concerns about a developing housing bubble in the country's largest city.



Asked by Labor leader Bill Shorten about John Fraser's comments earlier on Monday, Mr Abbott said housing affordability was important but that home owners like him would prefer to see house prices continue to rise in Sydney.



"As someone who, along with the bank, owns a house in Sydney I do hope our housing prices are increasing," Mr Abbott said in question time on Monday.



"I want housing to be affordable but nevertheless, I also want house prices to be modestly increasing.



"The important thing is to ensure that our economy is as strong as possible so that people have as much resources at their disposal as possible, have jobs, so they can go out there and buy the things they need, including the housing that they need."

Mr Abbott said that if Mr Shorten was concerned that "things are happening that shouldn't be happening" in the housing market then he should support the government's small business package to help stimulate the economy.



Earlier in the day, the Treasury secretary delivered his strongest warning about housing affordability, saying he was worried an over-investment in housing spurred by low interest rates has led to housing bubbles in Sydney and parts of Melbourne.



"It does worry me that the historically low level of interest rates are encouraging people to perhaps over-invest in housing," Mr Fraser told Senate estimates hearings.

Mr Fraser pointed to the proliferation of television home renovation shows, saying they are a sign of the way in which low interest rates are affecting Australia's culture.