irrational exuberance in the property market, page-62

re: irrational exuberance in the property market t A good rule of thumb for land/house value is:
'when building, look to build a house of equal value to the land value'.
So if the land is worth 400k, then it deserves a 400k house/2houses/unit block, etc.

This only applies when its time to build, of course. If buying something that is established, I look at annual rent return as a % of house/land cost. The annual rent should be 6-8% of the total outlay, for a traditional suburb near a capital city.