Is Australian housing facing a repeat of 2003?

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Australia's property market is approaching the bubble extremes seen a decade ago, an analyst told CNBC, after the Reserve Bank of Australia (RBA) warned this week that the market looks 'unbalanced'.

"There was an intense bubble in the property market a decade ago. There were property 'spruikers' out there encouraging people to buy five properties at a time – everyone was buying property magazines and all the top rated shows on TV were property related," Shane Oliver, head of investment strategy and chief economist at AMP Capital, told CNBC.

"We haven't quite returned to the extremes we had back then but we're getting close and that's why the RBA is getting concerned," he said. "Danger signs are emerging."

A low interest rate environment and strong price competition among lenders have led to a surge in investment property, raising the risk of a repricing, the RBA said in its Financial Stability Review on Wednesday.

Read MoreRBA warns of risk of 'unbalanced' housing sector

National home prices rose an annualized 16.8 percent in the three months to August after a cooler period in the first half of the year. Meanwhile, prices in Sydney and Melbourne rose 16 and 11 percent, respectively, over the past 12 months according to RP data.

As a result, the RBA said it is considering measures to cool property investment that could include macro-prudential controls or credit restrictions designed to reinforce sound lending practices.

Worrying parallels

Fears of overheating in Australia's property market have occurred on and off since the turn of the century, but the period between 2003 and 2004 was most worrying, Oliver said.

Australian house prices were overvalued by as much as 51.8 percent amid low interest rates, high incomes and strong demand from foreign investors, according to the Organization for Economic Co-operation and Development.

Australia to see below-trend growth ahead: Pro
Australia to see below-trend growth: Pro   

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Parallels with that period are emerging, Oliver said, noting investors' share of mortgages is 40 percent, approaching the 50 percent seen in 2003. The popularity of 'The Block', a television show focused on property, is also worrying, he said.

A continued price rise and acceleration in investor lending could turn the risk of a repeat into a reality, he said.

Big city, little city

"While there are worrying parallels in Australia's larger cities such conditions are not prevalent in the rest of the country," Paul Bloxham, chief economist for Australia and New Zealand at HSBC said.

"What we're seeing overall has so far looked like a pretty normal housing cycle. National prices are up 11 percent over the past year [to August], we've got very low interest rates, you should expect house prices to be rising," he said.

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"But if the recent trends do persist for much longer, it might start looking overheated," he said. "You are seeing signs of that trend in Sydney and Melbourne."

"Australian housing may be expensive but you could have made that argument for the last 15 years," said Steve Goldman, manager of Sydney-based Kapstream Capital.

"The reality is default rates from borrowers are extremely low and the only way that goes up [is if the] unemployment rate goes higher, and we don't see that," he said. "That means housing prices will be continue to be stable and we don't foresee a crisis at least in the near term."