The Reserve Bank of Australia is set to front a Senate committee this Thursday to discuss the possibility of enforcing stricter lending rules in an attempt to keep the property market under control.

In its latest half-yearly Financial Stability Review, the Central Bank claimed the Australian housing and mortgage market is becoming “unbalanced” due to surging investor demand. According to the Review, investor housing loan approvals currently account for almost 40% of the value of total loan approvals.

However, Aussie Home Loans chief John Symond has told the ABC that enforcing tougher lending criteria is “ridiculous”.

"I'm concerned that what the Reserve Bank is suggesting is fraught with danger and it may well have unintended consequences that will hurt first homebuyers and other sectors playing the housing market," he told the ABC.

Labor Senator Sam Dastyari, who is the chairman of the committee, also told the ABC why the use of macro-prudential tools such as lending restrictions to curb property investment may be a risky move by the Reserve Bank. 

"The danger is unintended consequences whereby you kill off the only people that are investing in new housing stock," he said.

"We have to be very, very careful, the RBA has not yet made the case and that's why we're hauling them before a senate inquiry this week and demanding some answers."

According to the latest housing finance data released by the Australian Bureau of Statistics, investors are driving the growth in new home lending for construction with investment lending for new construction in the three months to July up 10.5% on the same period last year. For owner-occupiers, this figure was 8.8%.

For many industry pundits, it is this lack of housing supply that is the main cause of rising property prices. Even though housing construction has been forecasted to increase in 2015, Residential Development Council executive director, Nick Proud still doesn’t think it is enough to ease the pain.

“On average, Australia builds 150,000 homes each year, but this is simply not enough to meet demand, let alone reduce the housing shortage. These increased construction rates are expected to continue for the next 12-18 months – but the challenge is to keep up this level of activity to meet undersupply,” he said.