UBS Warburg have pointed out the sharp lift in price-earnings (PE) ratios for housing over the past few years and estimates that price adjustments may eventually be necessary to return to a "less stretched" price environment.
For housing prices to return to an average level by mid-2005, prices would need to fall by about 22 per cent (7 per cent a year). To return to a normal cyclical low point, the fall would be a staggering 43 per cent.
