This is interesting
http://www.businessspectator.com.au...-bubble-pd20110317-F24WP?OpenDocument&src=kgb
There has been much discussion over a number of years about whether Australia’s house prices are too high, and indeed whether there is a house price ‘bubble’. This notion is typified by the Economist magazine’s regular update suggesting that Australia’s house prices are up to 50 per cent overvalued against standard naive measures.
Our view is that these metrics are indeed too naive to be useful. Typically they take a measure of housing prices to income or to rents and compare the current level to a 15- or 20-year average. This ignores a large structural adjustment that occurred in the Australian housing market between 1997 and 2003. This transition involved lower interest rates, better-anchored inflation expectations, and increased availability of housing credit. Without some reversal of these structural changes – which is a virtual impossibility – we do not expect Australian housing prices to fall.