property markt in crisis, page-85

"Despite strong rises in gross rental yields, residential property is still delivering an income well below the cash rate. The net yield from property is still too low in our opinion," he said.

Mr Canavan said for property to be an attractive investment once again, gross yields must rise and be on par with other investments such as cash or bonds.

"For this to occur, either rents need to continue rising or prices must fall," he said.

"For rents to continue rising, wages would need to increase. But with both the government and the RBA keen to avoid an inflation breakout, we believe a meaningful increase in wages is unlikely."

He said the alternative was for prices to fall to lead to an increase in gross yields.

"To many, the thought of falling property prices is impossible," Mr Canavan said. "But with residential property prices already declining in the US, UK, Spain and Ireland, and listed property trusts under pressure globally, there is no reason why property prices cannot decline here in Australia."