Despite the steep prices, housing affordability is close to its highest level in a decade. Confused? Don't be fooled, says Michael Janda, because interest rates can't stay this low forever. And if prices surge, the likely outcome is an even bigger housing bubble.

The new year is less than two weeks old, and analysts are already arguing about the trajectory of Australia's real estate market.

Economist Stephen Koukoulas has caused a stir with his forecast that home prices will jump 10 per cent this year. This runs against prevailing wisdom that prices will remain flat or grow around the same rate as wages (3-4 per cent) in 2013, and against the main minority view that house prices will fall again this year.

One piece of evidence he cites is a 0.6 per cent rise in RP Data's daily home price index since the start of the year.

Mr Koukoulas himself admits that one swallow does not a summer make, and that a couple more months of data are needed before a trend can be ascertained, especially since the trend has been mostly down since October.

Despite the absence of a clear trend to date, as I've written on this site previously, I think there are many reasons why Stephen Koukoulas may be right.

However, I am not as sanguine as Mr Koukoulas about the likely consequences of such a home price rise if it does indeed occur.

A recent Fitch Ratings report compared the housing and mortgage markets of 12 different developed economies. The report confirms that Australian house prices have seen the biggest gain since 1997 of any of the dozen nations - although Ireland and the UK at one time had bigger peaks before their prices slumped post-GFC.

Australia also has the biggest debt-to-income ratio for people buying houses at the current time, with a household buying an average-priced home devoting well over 30 per cent of their income to mortgage repayments.

The Fitch report also shows Australia's houses are the second most expensive relative to GDP per capita - the standard measure of national income per person. The only nation of the 12 with relatively more expensive houses is Greece, and that is only because its GDP has been tumbling for five straight years.

Mr Koukoulas and many other analysts counter that, despite the steep local prices, housing affordability is just shy of its highest level in a decade. However, this is illusory affordability - mortgage repayments are lower because interest rates are below average, not because housing is significantly cheaper than it was.

The term illusory is particularly apt as home purchasers must generally make repayments for at least 20 years to pay off their loans, a period during which interest rates will almost inevitably pass through various cycles of being below, above and right around average.

This illusory affordability is dangerous because it can fool potential buyers into thinking they can afford a home, when they cannot at more typical interest rate levels - a problem well illustrated by the upfront rate discount periods that lured many Americans into loans they could not afford, and ultimately triggered the GFC.

The only way this high level of affordability based on low rates is sustainable is if the RBA guarantees that it will hold the cash rate down for many years, something akin to the US Federal Reserve's commitments.

However, firstly, the RBA is highly unlikely to do this and, secondly, if it did, it would present other serious risks for the economy - not only housing bubbles but other asset price surges, and the decimation of earnings for those relying on bank deposits.

So, as Mr Koukoulas argues, the conditions are in place for another jump in house prices, much as they were in late 2009 - with low rates and low unemployment. However, most young Australians cannot prudently afford to buy a home now, let alone if prices jump another 10 per cent.

That means the likely outcome if prices do surge will be a bigger housing bubble and a more painful crash when it does inevitably burst.

Michael Janda is the ABC's online business reporter. View his full profile here.