Banks tense over house price rises

By ANNE GIBSON

Rampant house prices are 30 per cent ahead of where they were in the last boom in the late 1990s - and the banks are becoming increasingly nervous.

Westpac chief economist Brendan O'Donovan said a range of economic indicators was causing alarm bells to ring:

* Inflation-adjusted house prices were 30 per cent above the last peak in 1997.

* Median house prices were now four times the average household income, compared with an average multiple of three since 1990.

* Housing debt has soared to 110 per cent of household income, up from an average of 90 per cent in 2001/02.

* Rental yields have fallen to historic lows.

O'Donovan said these signals were worrying because house prices appeared to be extremely "frothy".