Australia's biggest lender does not believe the housing market is in bubble territory, despite soaring prices in some areas.
The Commonwealth Bank, which has unveiled a massive $8.68 billion cash profit, says the housing market isn't showing the characteristics of a bubble.
"Factors that typically characterise a house price bubble, such as rapid credit growth, an easing in lending standards and expectations of rapidly rising prices, are either not evident or evident only to a limited extent in Australia," the bank said in an investor presentation.
It said the influx of investors in the market was a "rational response" to low interest rates, with the Reserve Bank of Australia's cash rate stuck at 2.5 per cent for more than a year.
It said most of the recent price increases had occurred in Sydney, where prices had until now been stagnant since 2004, and in Perth, which was experiencing strong population growth. Gains in other cities and regional areas had been more restrained, it said.
Recent figures from the Australian Bureau of Statistics show Sydney house prices rose 15.6 per cent in the year to June, while Melbourne prices were up 9.3 per cent.
The Commonwealth also said a lack of new housing supply meant a significant fall in prices was unlikely.
The bank's statements follow a recent report by HSBC chief economist Paul Bloxham, who said the Reserve Bank would need to lift interest rates in 2015 to prevent a housing bubble from developing.