The Economist: Aussie house prices “on an unsustainable path”

FINANCIAL media focus most of their attention on stocks and bonds, but the world’s biggest asset class is actually residential property. With an estimated value of about $200trn, homes are collectively worth about three times as much as all publicly traded stocks.

The charts above track housing-market indicators across 27 economies, as well as for 20 cities in America, in some instances going as far back as 1970. The first two metrics are price indices, one expressed in nominal terms and another adjusted for inflation. The second two measure valuation: one compares house prices with their long-run relationship with individual incomes, and the other with the historical ratio of home values to rents. If house prices climb faster than either earnings or rent payments for a long period of time, a financial bubble may be forming.