Australia’s property markets are at risk of a “sharp correction” according to the Organisation for Economic Cooperation and Development.

The international organisation is the latest to join the chorus warning of the risk of a big fall in house prices.

“The continuing property market momentum adds to the risk of a sharp correction,” it wrote in its latest report on Australia.

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The warning echoes concerns raised by the Australian Government’s Treasury secretary John Fraser this week that Sydney is “unequivocally” in a bubble.

The OECD warns the RBA not to cut interest rates again, saying “monetary policy firepower” should be held in reserve given the uncertainties about the outlook and inflationary effects on house and other asset prices.

To encourage growth it says the Government needs to consider sound policy, tax reform, cuts to red tape and competition boosting measures.

Treasurer Joe Hockey on Thursday morning told ABC Radio National’s Breakfast program that he has concerns about how his children will be able to afford a home.

However, he does not believe there is a bubble.

“When you look around the world, bubbles have burst in real estate when there has been too much supply and not enough demand, whether it be in China, the UK or Ireland or the United States, that’s when bubbles burst, and I’d say we’re a very long way from that in Australia,” he said.

Mr Hockey dismissed calls for intervention to cool prices and talked up the Government’s “stricter regime” for foreign investment in housing.

He said the best way to respond to higher prices is to continue to add to supply.

“What we’ve seen is a massive increase in the amount of housing construction in Australia in the last year, up 18 per cent, which is 30,000 more dwellings being constructed last year than the year before and that’s the best way to respond to elevated prices.”

-ABC