The Reserve Bank said on Friday that in New South Wales and Victoria – where house prices have risen much faster over the last year than the rest of the country – the share of income required to service an average home loan over the next 10 years "is close to historical highs."

The reality check comes after ANZ chief Phil Chronican warned that Australians have an "irrational obsession" with property investment, calling for a frank debate about tax distortions that pump up house prices.

The Reserve Bank's latest statement on monetary policy shows that homeowners in Sydney and Melbourne will find it harder to service their mortgage debts in coming years.

It said that, although interest rates are at a record lows, the "expected repayment burden" on home loans in Australia is actually at 10‑year average levels.

It comes as Sydney's spring auction season climaxes over the next few weeks, with 928 properties going under the hammer on Saturday and 870 next week.

The Reserve Bank Governor Glenn Stevens has previously warned against excessive risk taking in the property market while rates are low, saying it could leave the economy exposed to nasty shocks in the future. The RBA also recently expressed concerns about imbalances between the number of investors and owner-occupiers and the impact that imbalance was having on house prices.

It comes as the Australian Prudential Regulation Authority warned on Friday about the health of Australia's big banks, saying they are poorly prepared to recover from a financial crisis.

In a major speech in Sydney on Friday, Australian Prudential Regulatory Authority chairman Wayne Byres revealed the results of the regulator's industry-wide stress test of Australian banks' mortgage books conducted over recent months.

"If we draw one conclusion from the stress test this year, it's that there remains more to do to be able to confidently deliver strength in adversity," Mr Byres said.

With surging house prices in Sydney and Melbourne putting an unprecedented level of attention on the risks inside bank home loan books, Mr Byres said the low-risk nature of Australian housing portfolios "has traditionally provided ballast for Australian banks ... but that does not mean that will always be the case."

Late last month, Mr Byres told a senate estimates committee that lending standards were being stretched in Australia because major banks were competing aggressively on home loans.

Nation-wide inflation remains low, at just 2.3 per cent, which is well within the RBA's target inflation band of 2 to 3 per cent.

But the RBA says the housing sector has been the major support of inflation in the last 12 months, with strong conditions in the housing market exerting "upward pressure" on inflation in contrast to "a general easing in domestic inflationary pressures, associated with spare capacity in product and labour markets."

The RBA statement said housing inflation had picked up over the past two years to be around its average over the inflation-targeting period with the pick-up in housing inflation has being driven by the cost of new housing.

"The price of a newly built dwelling has risen by nearly 4 per cent over the past year – faster than its historical average and around the quickest pace in nearly five years, a period over which conditions in this market had generally been subdued," the RBA said.

In contrast to new dwelling costs, the growth in rents has eased in recent years, to be around its slowest pace since the mid 2000s.