Separately (but presumably on a closely related note), GMO have written to me directly asking for a copy of our dwelling price-to-income ratio data. I have, of course, supplied it to them, and independent analysis that arrives at the same conclusions from the RBA and Westpac (I could have also given them Goldman, UBS, ANZ, and CBA analysis, but did not bother).
I am guessing that GMO is getting a little bit nervous about being held to account on their 7.5x dwelling price-to-income ratio claims, which is way above the RBA's estimate of a tad under 4.5x, which in turn coincides with Rismark's finding of 4.6x (see middle panel of chart below).
Nevertheless, I am sure that GMO carried out very detailed analysis before making their extraordinarily strong statements about the Australian housing market being the mother-of-all-bubbles and 42% overvalued based on their dwelling price-to-income ratio. This hopefully means that they will still be prepared to put their money where their mouths have frequently been, and back the predictions they have communicated to the global investment community; that is, I trust that they are happy to short our national house price index to the tune of $100 million over the next three years.
