Are Sydney and Melbourne experiencing a housing bubble? The chairman of the Australian Securities and Investments Commission, Greg Medcraft, thinks so. "History shows that people don't know when they are in a bubble until it's over," Medcraft told The Australian Financial Review.

"I am quite worried about the Sydney and Melbourne property markets. In housing, the long-term average income to average price ratio is four to five times but at the moment it is at historic highs," he said. Medcraft has warned investors against borrowing to invest in real estate.

Auction clearance rates fell in Sydney over the weekend, giving policy makers hope the market might cool from its recent frenzied pace. The clearance rate was 84 percent, down from 86 percent the previous weekend. The Melbourne clearance rate was up from 77 to 80 percent, and down by one percent to 46 percent in Brisbane. In Adelaide, the clearance rate was up from 57 to 79 percent. Nationally the rate was up to 80 percent, according to Domain.