We construct rent-price ratios for houses and units in 82 local government areas in the Sydney and Melbourne markets for the period 1985/86-2015. Using this annual data we employ long-horizon regression techniques and find that rent-price ratios (i.e. rental yields) have predictive content for...

Using recently developed econometric procedures (Phillips, Wu and Yu, 2011; Phillips, Shi and Yu, 2015), we find evidence of temporary episodes of explosive behaviour in price-to-rent ratios for established houses, in five of Australia's largest cities. One interpretation of our results is that...