My reading of Prof Keens article is that he is pointing out the absurdity of Bettellino claiming the Australian market had peaked in 2003 when, in fact, it has increased 27% since then. It therefore follows that we can’t be three years ahead of the US, whatever that means, and are presumably ‘pre-crash’ rather than ‘post-crash’ as Batellino hopes. The recent dip in prices might, therefore, be a shape of things to come.

Your view that the ‘hottest’ point of the market is when prices are increasing fastest is not a figure Keen appears to have used. However it clearly does not pick the peak in prices, which is what is being discussed here, since prices increased fastest from a low base in the early part of the boom according to the figures you have provided. At your ‘hottest’ point in 2003, median prices in Canberra were $145 000 lower than they are right now.

As for rental yields, well no they have no kept pace with prices. Unfortunately I can’t post graphs here, but the average rental yeild across 6 capitals was actually at a high of 8-9% in the late 80s. It dropped from about 5% in 2000 to below 3% in 2003 and has only gradually recovered to its dizzying heights of a few points below cash. It has, until the recent crash, always yielded less in rent than earnt by shares over this time.

The point, which I really do understand, is that current house prices represent at least an opportunity cost of 1.5% gross yeild on cash. Since people don’t invest to lose money, until prices increase or rents increase substantially then property is over-valued as an investment vehicle. Since many think rents or prices can’t increase much, that leaves the option of house prices dropping until the yeilds justify the price (at least for investors).

So the whole article is a ‘furphy’ because you disagree with one of 5-6 points made? (of which you failed to understand the significance anyway).Ridiculous.

There are also massive deviations from other fundamentals, such as price in terms of household income.