After analyzing data from the Australian Property Institute, AMP Chief Economist Shane Oliver found that housing prices across Australia are overvalued by more than 29%.

This discovery has raised concerns about the trends in the real estate market. However, experts state that overvaluation does not necessarily mean that housing prices will quickly fall to reasonable levels.

Oliver compared the relationship between median house prices and average rents over time and found that housing prices are becoming increasingly overvalued. He likened this indicator to the price-to-earnings ratio in the stock market, stating that the situation is similar to comparing stock prices to fundamental earnings.

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Specifically, in December 1983, the national median house price was $69,569 AUD, with an average weekly rent of about $110 AUD, equivalent to an 8% annual return on housing value from rent. Today, the median house price is $1,091,938 AUD, with an average weekly rent of $574 AUD, equivalent to rent being only 2.7% of the housing value per year, indicating a significant upward trend in housing price valuations.

Some economists express concerns that the market may be at risk of being highly overvalued. However, they also point out that in the short term, a severe economic downturn or significant reduction in immigration is unlikely, thereby reducing the likelihood of a substantial decline in housing prices. Additionally, they emphasize the current policy environment of relaxed interest rates, which typically signal increases in housing prices rather than significant declines.

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On the other hand, Australian real estate investors typically prioritize capital growth over rental returns. Therefore, as long as housing prices continue to rise, the overvaluation of their properties is actually beneficial to them. Some experts believe that the term "overvaluation" is too exaggerated in the real estate market and prefer to use the term "expensive." They argue that housing prices cannot be considered overvalued unless they decline.

Furthermore, another key factor in the real estate market is rental return. Some economists point out that investors consider not only capital gains but also rental returns, especially as housing shortages contribute to upward pressure on rents. This situation is unlikely to change in the short term, so investor perceptions of housing prices may continue to favor capital gains.

For a long time, there have been predictions that the Australian real estate market is in a bubble. However, with declining interest rates and the influx of immigrants, the real estate market continues to grow. Some experts believe that the key to addressing high housing prices is to provide more housing, especially affordable housing, and consider building residences in remote working areas. Maintaining a moderate level of immigration is also necessary to meet housing demands.