One key new argument the RBA advances about why not to worry about the current situation in Sydney and Melbourne is that most of the new investment is in new housing stock, especially apartments.
"Much of the increase in credit is being used to finance new housing construction rather consumption in contrast to the experience of the early 2000s)," it says.
Self-correcting
To that extent, the RBA argues that the current housing boom will be self-correcting. House prices will slow or fall as the new construction reduces the gap between supply and demand.
Indeed, the RBA is more worried about an excess of supply in Melbourne and Brisbane which could dramatically reduce prices. "There are concerns that the significant new supply of dwellings in the pipeline will outpace growth in demand for housing and place downward pressure on rents and prices."
Several analysts, including CBA, predicted the RBA would cut rates on Tuesday despite the concern over house prices.
But CBA is still expecting rates cuts. It says the housing market will ease once new apartments flood the markets and the effect of two rate rises this year dissipates.
"As conditions in the housing market cool, largely due to the combination of dwelling supply lifting and the stimulus of the May and August rate cuts fading, the hurdle to another rate cut will be lowered," CBA said in a note.