The housing shift to cheaper cities is happening: John Fraser

Treasury secretary John Fraser has welcomed the cooling off in the country's biggest housing markets. 

After "rapid" growth in Sydney and Melbourne prices in recent years, Fraser said the market appeared to be slowing.

He told the Citi investment conference they were the early signs the curbs on riskier bank lending were doing their job.

There were also signs homebuyers were responding by moving to lower-priced cities and regional centres.

Fraser acknowledged the build-up in household debt had accompanied strong house price growth in recent years, but signalled he was not "too alarmed" by the trend.

"It's good to see some of the recent moderation in house price growth, and while it's too soon to make a final assessment of the impact of APRA's March 2017 macroprudential measures, the signs at the moment are promising," Mr Fraser said at Citi's investment conference in Sydney.

When asked is he still held the view that Sydney housing was in a "bubble", as he said two years ago, Mr Fraser referred to "welcome signs of slowing" in the market.

He also emphasised the very different market conditions across the regions, with signs Western Australia's market might be starting to recover after a sharp slump triggered by the mining bust."These things are cycles, and we are perhaps starting to see that cycle playing out," Mr Fraser said.

Fairfax Media reported Fraser also referred to strong growth in the population in regional centres such as Bathurst, Geelong, Dubbo and Ballarat, saying people were responding to the very high cost of housing by moving outside the largest cities.

"I'm getting the feeling that a lot of people are now starting to react to some of the high house prices in the east coast capital cities by thinking about relocating to other capital cities or regional centres," he said.