A senior Reserve Bank official says rising house prices do not actually benefit most owners, and tend to transfer wealth from the poor to the rich.

The RBA's head of economic analysis, Tony Richards, says it is good that Australia seems to have escaped the large house price falls that destabilised many other advanced economies such as the US and UK, but that rapid price rises might be similarly destructive.

"Looking forward, the risk is that we might move towards undesirably strong growth in Australian housing prices," he told a CEDA forum on housing affordability.

"Mortgage rates are particularly low at present and, as the Bank has noted on a number of occasions, it is not reasonable to expect that interest rates will stay at the current low levels indefinitely.

"When they do rise towards more normal levels, discussions on housing affordability will again focus more on the level of housing prices relative to incomes."

Mr Richards also emphasised the disproportionate impact that house prices rising faster than incomes had on lower income households.

"Lower-income households are less likely to own housing, either their own home or an investment property, than higher-income ones," he said.

"So when the price of housing rises, higher-income households tend to benefit at the expense of lower-income households."

He says housing is a zero sum game, where any benefits in rising prices for existing owners come at the direct expense of those entering the market.

The main benefits of rising house prices only accrue to investors, as owner-occupiers who see the value of their current house rise will likely have to pay roughly the same increase to buy another property to live in if they move.

Not only that, but the more households spend on housing, the more they pay in interest to the major banks, and the less they have have available for spending on other goods and services.

"As I have noted before, as a nation, we are not really any richer when the price of housing rises, but the more vulnerable tend to be hurt," Mr Richards said.

'Reduce impediments' to development

Tony Richards says it appears that the trend towards smaller household sizes has ended, and is perhaps even reversing, however he also notes that this may be because more people are having to share housing to make it affordable.

Even if household sizes have stabilised, he says the demand from a higher birth rate and immigration numbers is exceeding the current supply of housing.

"The population estimates that came out last week showed growth of 2.1 per cent over the year to the March quarter, which of itself would imply demand for around 165,000 new dwellings a year, which is well above the construction level of recent years."

While Mr Richards acknowledged the impact that the financial crisis had been having on access to finance for large developments to proceed, he says that is likely to ease as credit markets continue to improve.

He says the main long-term problem is the difficulty in getting planning approval for new housing.

"In particular, even if one discounts some of the reports from the housing and land development industry groups, it is clear there have been problems in recent years in land zoning, and in the development and building approvals processes," he said.

Tony Richards say this problem is only likely to get worse as the supply of large former industrial sites near the centre of many Australian cities dwindles.

"The bank's liaison program has indicated that the stock of remaining available new 'brownfield' sites for housing may be relatively limited compared with the past," he said.

And he warns that some inner-city communities are going to have to get used to more high-rise housing if a an affordability crisis is to be averted.

"Some increase in density is inevitable as the populations of our cities grow, this will put greater focus on the replacement of existing housing with higher density housing," he said.

"Of course, this process is frequently unpopular with existing residents, so there are all sorts of difficult issues for state governments and local councils to deal with.

"Nevertheless, if housing affordability is a concern, it will be necessary to keep working to reduce impediments to the construction of new housing, both inside our cities and at the fringes."