Australian house price rises are among the highest in the world but a new report warns homes here could be overvalued.
The Bank of International Settlements, known as the central bank for central banks, says Australian house price growth was second only to Norway.
But stripping out the effects of inflation, Australia's real property price growth rate was almost flat in the past three years, the report said.
The BIS data, which covered 29 countries, also shows that Australia's housing prices were unusually high relative to rents, along with Norway, Canada and Sweden.
"This could be a reason to expect a price correction in the future," the report said.
"Interestingly, some of these countries have experienced only moderate price growth recently (eg Canada, Norway and Sweden), or even price declines (eg Australia, Belgium and France)."
Only Belgium had higher prices than Australia when compared to household incomes, the report showed.
It said current property prices in some countries were at least 20 per cent higher than those implied by the historical relationship to incomes, suggesting "potential downward pressures on real house prices".
"This might lead to a reversal or moderation of recent growth (eg in Canada) or a further sliding of prices (eg in Belgium and France)," the report said.
"This argument would be more compelling for markets where prices have grown rapidly in the recent past, and where income growth is projected to be rather moderate."
Australian house prices, particularly in Sydney and Melbourne, have risen sharply in the past 18 months while wage growth has been subdued.
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