Winter is upon us, and it is typical during this time of year for the property market to hibernate until the Spring sunshine brings forth new optimism in the form of a wave of new sales listings and a new brood of enthusiastic buyers.

Yet life goes on in the meantime, and of recent note was RBA Governor Glenn Stevens speech at The Econometric Society of Australasia Meeting in Hobart on 3rd July which considered whether or not the property market is overvalued.

Okay, Im sure we could all imagine the incredible tomfoolery that might happen as a bunch of economists meet up to talk shop, but in all seriousness this was an important meeting, and for your convenience I have summarised Mr. Stevens speech for your easy consumption.

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But first a word of caution it is always better to read the source than the commentary, and for that reason I have reproduced the speech transcript with my mark ups  on it  (in case you want to see what I thought was important).

1. Go You Good Aussie Thing!

The Aussie economy is holding up well. In fact, economic growth for the past six months has been better than the RBA expected to the point the comment was made that the GDP numbers probably overstate the true ongoing pace of growth in the economy.

It seems the big question is how will the economy handle the new world of post resource construction where output volumes are higher but prices lower, and at a time when Chinas economy appears soft?

That is, as the resources industry stabilises, what is going to take its place to keep our economy humming along?

2. Down, Down, RBA Cash Rates Are Down

How low? 50 year lows to be exact, and, after you adjust for inflation, the RBA cash rate is zero! Of course, home loans are at the cash rate plus a margin, but by any measure interest rates are extremely low and in the opinion of the RBA, seem likely to stay so for a while yet. In fact, some in the money markets seem to be thinking the next rate might be down, not up.

Whatever might happen, Mr. Stevens goes to some effort to explain that before interest rates would rise the RBA Board intends to revise its press release language to announce a shifting monetary policy season is looming. Im sure wed all appreciate the heads-up here, but dont misread this intention as a guarantee.

3. Whats Ahead For The Pacific Paso

Ahhhh the Aussie Dollar! When predicting whats to happen Im reminded of an old joke how to you get $1m? Start with $10m and trade currencies!

Still, Mr. Stevens does note that by historical standards the AUD is high by historical standards, and by most measurements, is overvalued by more than just a few cents.

4. Watch Out Sydney Investors

Finally, Sydney property investors were cautioned not to expect property prices to increase at the same impressive rate as has been achieved lately into perpetuity. The sobering warning that prices sometimes fall needs to be heeded.

That said, some segments of the property market were noted as calming down, which is soft economic-speak for prices flattening out.

Application For Property Investors

Important takeaways from this speech include:

• There does not appear to be an economic shock on the horizon that would trigger a significant correction in house prices. That said, the economic conditions to sustain a property boom dont seem to exist either.

• In the absence of market gains, you need to rely on your own skill and expertise to drive income and growth gains, meaning that you should be trying to make, rather than buy, a great deal by leveraging your skill and expertise (and if you want to know more about how to do this )

• Take that US holiday, because at some time in the future well be reflecting back on when the Aussie Dollar bought more than 90 US cents. Its anyones guess as to when this will be though, but Mr Stevens did indicate that a significant fall could be on the cards.

• We live in a time when interest rates are at multi-generational lows, which means its time for investors to make hay while the sun is shining. Again, at a time to be determined henceforth when home loan rates are higher, investors will look back on today and lament that they didnt make better opportunity of the low interest rate environment.

• Think twice before locking in your interest rate as low variable rates seem likely for the foreseeable future.

• Its a bad time to buy a bad investment in Sydney. You might think its always a bad time to buy a bad investment, but rising property prices hide a multitude of investing sins. It is your responsibility to make good investing decisions, and for that reason you should be continually refining and improving your investment acumen.

So just to be clear nothing in Mr. Stevens speech leads me to believe they are worried about a property price bubble existing at the moment. although they are cautious about speculative lending to those of dubious credit.

While Aussie property is expensive by world standards, it is within historical parameters. If a bust was to happen it would have to be predicated by an event (on a world scale) that does not exist at the moment.

And to finish off a joke about economists, of course

Man walking along a road in the countryside comes across a shepherd and a huge flock of sheep. Tells the shepherd, I will bet you $100 against one of your sheep that I can tell you the exact number in this flock. The shepherd thinks it over; its a big flock so he takes the bet. 973, says the man. The shepherd is astonished, because that is exactly right. Says OK, Im a man of my word,take an animal. Man picks one up and begins to walk away.

Wait, cries the shepherd, Let me have a chance to get even. Double or nothing that I can guess your exact occupation. Man says sure. You are an economist for a government think tank, says the shepherd. Amazing! responds the man, You are exactly right! But tell me, how did you deduce that?

Well, says the shepherd, put down my dog and I will tell you.

Id be interested to know your thoughts (or perhaps a good joke). Leave a comment below.