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And yet Eslake calls it "fair value". His graph and comments imply that there's a consistent and remarkable pattern to house prices over the last 35 years and that he expects it to continue in the future. In contrast your comment about the NASDAQ bubble indicates that you expect this pattern...

From here http://www.businessinsider.com.au/merrill-lynch-housing-price-growth-will-weaken-in-2015-2014-11 In the article Eslake's gist was to warn us of a price slow down or even decline, however the graph he produced had the unwanted effect of contradicting some of his long held views. :)

So what's the problem hobo-jo? The central point in both Eslake and Drozda is that while current prices don't make sense in relation to income, they perfectly do in relation to income + IRs. Whether you call it affordability or capacity to pay is beside the point. And yes, there are other...

An article from Drozda argues the same thing. http://www.propertyobserver.com.au/financing/28271-australian-property-prices-explained-independent-analyst.html His measure of "buy cost" (i.e interest payments on a 100% loan for a median priced house) is found to be roughly in line with...

This most recent chart by Saul Eslake is interesting. What it shows is that for the last 35 years house prices in Aus have increased twice faster than income, but only as fast as the combined effect of income and interest rates, meaning that current prices may be "fair value" after all. The...