australian home prices world s most overpriced, page-27

"Based on a historical gauge of home prices to rents between 1975-2010, the magazine estimates that Australian residences are 56 per cent over-valued, exceeding the 54 per cent over-priced rate in Hong Kong and 48 per cent in France."

So let's do some maths here: The average house price in Australia is around $485,000. According to some boffin in UK/US we are currently overpriced by 56% which means ultimately we should have an average price closer to $213,000. That's a difference of $270,000.

So, as a bear, you want to sell your home to take advantage of the impending drop. But you still have to live somewhere. Average rentals are, say, $500 a week so in essence, $270,000 will pay for 10 years of rent. However, that assumes zero rent increases over that time, which, to be frank, is highly improbable. The other thing to point out here is that over a 10 year period, wage growth, inflation and population growth will almost certainly force house prices higher. But lets ignore that aswell, for the sake of simplicity.
Outcome: Zero equity growth regardless of whether property rises or not, possible opportunity to deploy capital elsewhere, and an escalating cost of over 10 years, starting at $270,000.

The alternative, of course is to buy a house now ($485k) with a 15% deposit and pay a mortgage. The current interest rate is around 7.5%, maybe slightly higher if you want to lock it in for a ten year period, but in essence, you are committing to a monthly payment of approx $2500 or $250 a month more than your rental cost. In buying the property, you can secure against ANY further accommodation costs by locking in your mortgage, and you have positive exposure to wage growth, inflation and population growth. Oh, and if we have another boom in property, you get exposure to that aswell.
Outcome: Probable equity growth (long term average of 4% pa), a freezing of costs, and a hedge against wage growth, inflation and population growth.

I can understand selling a house at the top of the market, if you are fortunate enough to get the timing right, but to sell now is absolute madness.