Reserve Bank of Australia Governor Glenn Stevens has warned home buyers to be wary of taking on too much debt to buy a property, especially in light of a sharp rise in Sydney prices.

Current levels of household debt weren’t “disastrous”, Mr Stevens said on Friday, but an acceleration in credit growth to home buyers would be a concern.

“It’s pretty high now and we’d surely be asking for trouble if we saw a big step up from where we are,” he told a federal parliamentary committee in Sydney.

“People need to keep in mind that prices don’t just rise, they can fall, they have fallen and we need to be careful that we don’t take on too much leverage.”

Australian residential property prices have climbed around 9.5 per cent in the past 12 months, and home prices in Sydney have jumped more than 14 per cent, according to research firm RP Data.

The median Sydney dwelling price, which includes units and houses, which is close to eight times the average Australian adult wage, according to Australian Bureau of Statistics figures.

Meanwhile, first home buyers appear to be dropping out of the market.

The percentage of home loans taken out by first home buyers fell to 12.7 per cent by the end of 2013, well below the 18.5 per cent average for the preceding 10 years.

Mr Stevens said housing affordability had improved since the global financial crisis due to interest rate cuts and a soft housing market, but buying a home had become less affordable recently due to the runup in prices.

He also said there was strong demand from foreign investors for houses in Australia’s major cities, but their impact on house prices seemed to have been overstated.

“In particular parts of our cities, the role of foreign investors is quite prominent indeed, but I suspect rather less prominent than some of the headlines might suggest,” he said.