some interesting stats on housing, page-5

You can't look at any one variable in isolation and use it to decide what will happen.

Interest rates are only one factor. In the USA you have plunging interest rates but you have vacancy rates of circa 10%

Those high vacancy rates mean that the supply/demand ratio is heavily in favour of the potential buyer so despite low loan servicing costs buyers need not raise their bids as 1 in 10 houses sit vacant (no tenant, no owner occupier etc).

In Australia the vacancy rates are still in the 1 - 1.5% range so the supply/demand ratio is more balanced.

If there were masses of houses soon to be built, this would be due for change but building has stagnated. Even if building were to fire up it usually takes 12-18 months before new supply makes it to market.

I maintain what I have said many times. There will be a move back to property over the next two years.

This will be driven by:

1) The unattractiveness of the other two asset classes. Shares will only attract institutional investors, too many retail investors need time away from shares. Low interest rates will mean that cash investment will not keep pace with inflation, maybe not even with bank fees and charges.

2) The low interest rates and rising rents will make servicing of a property investment loan fall to levels not seen since the late 90's.

3) The relative sense of security (or perception therof) afforded by property investment.

In about two years, maybe three, we will have a different situation, the rising capital values will be making rental returns less attractive, the increased rate of building by that time (helped by FHOG) will be taking renters and turning them into homeowners, the overheating economy will force the RBA to look at rate rises.