There is an increasing number of commentators talking about Australian residential property being overvalued.
Of course, the high cost of entering the property market is no news to most of us, but the International Monetary Fund made it even clearer earlier this month.
As the IMF's Global Financial Stability Report sees it, a quarter of the price increase in Australian housing over the past 10 years can not be explained by fundamental economic indicators. The IMF report does not say house prices will fall, but it does put Australia among the developed countries that are more vulnerable to trends such as tighter credit conditions.
Rising house prices and a sophisticated mortgage market also led consumers to use their homes as security for other purposes, upping the risks in a downturn.
More recently, Alan Moran from the Institute of Public Affairs said the inflation from monetary expansion and booming economy had been hidden in housing.
Excess liquidity, combined with a restraint on land availability, has seen the price of existing houses surge.
In the past six years, house prices in Britain increased 60 per cent, while in Australia and US, house prices rose 50 per cent.
Based on the underlying worth of land -- which Moran says is abundant in Australia -- the average Australian house is overvalued by at least $100,000.
The obvious implication is that if an asset is overvalued, it will fall.
Some are predicting a heavy fall; others tip a more measured slide.
Commentator Michael Matusik is one who thinks those who expect the worst will be wrong.
The chronic imbalance between supply and demand will underpin the market, he says.
Although the Reserve Bank of Australia has increased rates, slowing the market, those making comparisons with the US are ill-informed, Matusik says.
In the US, there is 16 months' supply of new homes. In Australia, the new housing market is undersupplied by 32 per cent across the country and probably more in the three major states.
Matusik puts the lack of new housing down to lengthy approval processes, rising costs and restrictive land supply, and says these root causes are unlikely to improve any time soon.
"In fact our reading of the tea leaves is that they are likely to get worse," Matusik says, with the undersupply possibly reaching 40 per cent by the end of the year.
Assuming interest rates remain on hold, demand for resources remains high, unemployment stays low and immigration continues strongly, he believes prices will rise by 5-8 per cent this year.
And if rates peak some time this year and drop in 2009, we could see double-digit housing price rises in 2010.
Matusik estimates that house prices could be 25 per cent higher by the end of 2010 and weekly rents could be 35 per cent higher.
