Treasury head John Fraser concedes the Turnbull government's suite of measures to tackle housing affordability will take a long time to have an impact.
Developments surrounding the housing market remained a key risk to Australia's economic outlook and was an issue being carefully monitored by the nation's financial regulators.
"When I was buying a house in the seventies it was a far easier process and I don't take any joy that for many families it's a bigger hurdle to jump than we ever imagined," Mr Fraser told a Senate hearing on Monday.
There was no doubt low interest rates had combined with population growth along the east cost to increase demand and support greater dwelling investment, he said.
At the same time, insufficient land release, complex planning and zoning regulations and public aversion to urban infill have impacted the supply of housing.
Macro-prudential measures taken recently by the Australian Prudential Regulation Authority demonstrated a sensible and careful response to address risks and underpin market stability, Mr Fraser said.
Last week, global credit rating agency Standard & Poor's downgraded 23 small financial lenders concerned about rising household debt levels and the risk of a housing price crash.
Asked by Greens senator Peter Whish-Wilson if APRA had responded by doing by doing too little too late, Mr Fraser said: "It is too early to tell."
Like the government's housing affordability measures, "it takes time".
"You can't be on the bridge saying 'changing course', it's not like that," he said.
Mr Fraser also sent a warning about the future course of interest rates.
"Sometime between now and Armageddon interest rates will go up, I don't know when but they will go up and that's something people should be mindful of," he said.
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