How overvalued is housing?

Once you take into account the structural decline in interest rates over the past 40 years, housing in Australia isn’t as overvalued as some analysts have suggested. In fact, in most capital cities it is hardly overvalued at all. It even appears fairly valued in Perth and undervalued in Darwin. That said, the risks are concentrated in Sydney and Melbourne, where prices appear to be 25-30% above their fair-value.