The Economist magazine’s latest survey of global housing reported that Australian property had the poorest return on investment of the 20 countries it evaluated.

The same survey found that Australian property was overvalued by 61% based on the current ratio of house prices-to-rents and historic ratios.  Next on the list was Hong Kong (53% overvalued), followed by Spain (50%).

So is our property market really so overpriced and a bubble waiting to burst?

Interestingly I've read similar commentary from the Economist Magazine year after year after year, and in the meantime property values have just kept increasing.

I guess their argument could be, "Yes the bubble is just getting bigger and bigger which means Australia is heading for a bigger property crash just like overseas."

Why don't I think housing in Australia will drop in value like it did overseas?

Well in some area's, in particular some of the outer suburbs and lower socio economic suburbs, property values have been falling and are likely to fall a little further from their highs of earlier this year, especially when interest rates rise again later in the year.

But our overall market is unlikely to collapse because the current property fundamentals, including our strong economy and the chronic shortage of housing, will insulate Australia from a property crash.

The Economist keeps analyzing Australian properties as if they were shares – it’s like comparing apples with oranges.

Firstly, I believe it is wrong to assume rent levels are a good indication of what homeowners feel they should pay for their homes. Again it’s a bit like treating property likes shares and saying they should have a particular yield. Remember in Australia 70% of properties are bought by owner-occupiers. And one of the things that keeps pushing our property prices up, is that by and large these property owners all want to live in the same areas.

If you think about it, 70% of our population lives in one of 8 big capital cities and most of these people want to live in the inner and middle ring suburbs, near the city, near amenities and near their jobs.

Secondly, over the last 20 years “real” interest rates have fallen by about half relative to what they have been historically and this could provide an explanation as to why the rent-to-price ratios have fallen.

Of course, it’s not unusual for overseas commentators to get it wrong about Australian property. Only last month, US financial commentator Edward Chancellor said that Australia was in the midst of an unsustainable property bubble.

But his thoughts and those of the Economist have been quickly dismissed by a raft of Australian economists who remind us that Australia’s property markets are nothing like the USA or the UK.

For example Michael Workman, Commonwealth Bank senior economist said: "The story about house prices falling tends to be pushed pretty strongly from overseas groups in particular because they don't understand the growth outlook here and the under-supply of dwellings.”

We know that Australia doesn't have suburbs full of empty houses awaiting mortgagee sales like the USA. Instead we are not building enough houses. While we need something like 200,000 new homes each year to supply accommodation for our growing population, we are only building in the order of 165,000 new dwellings each year.

From a supply and demand perspective, America is over-built - there are just too many houses. In Australia it's the exact opposite - we are not building enough houses and our vacancy rates are at historic lows. The shortage of 200,000 dwellings in Australia that has been reported by various sources including Australian Property Monitors, ANZ Bank and the HIA will help put a floor under house prices.

Sure some Australians are currently have issues with housing affordability and are putting off their home buying decisions. But people still need a roof over their heads. People are still getting married and people are still getting divorced, some are having babies and others have to move house for their jobs.

If they can't afford to buy a house they rent one, hence vacancy rates are at unprecedented lows and pushing up rentals.

However price growth is leveling off.

Our property markets have changed – don't expect the type of capital growth many of us enjoyed in the last 12 months.

The Reserve Bank has deliberately put speed bumps on the road. They have increased interest rates to slow our booming property markets, and to an extent the general economy, on purpose.

In fact prices are falling in some suburbs, in fact in many suburbs.

What this means is that buying any property and hoping it will make a good investment just won't work in this new era in property. Now is the time to buy well in areas that will outperform the averages and look for properties to which you can add value.

In fact we have a two speed property market, with properties rising in some areas and not in others. Values will keep increasing in the inner, more affluent suburbs and not as much in outer, working class areas. As I said, in fact prices are falling in certain suburbs of all our capital cities.

If you really want to understand where the property markets are going and how to take advantage of the opportunities they will bring, and more importantly how to avoid the pitfalls like buying in all those suburbs where prices are dropping, please join me at the only round of public seminars I will be conducting until well into next year.

Click here for details of my Understand What’s Really Happening in our Property Markets seminars, that I will be conducting around Australia with finance strategist Rolf Schaefer and property tax experts Ed Chan and Ken Raiss.

When you join us you’ll discover unbiased research that sophisticated investors have been using to profit in good times and in bad.

The truth is…a select group of informed investors are smiling and excited about all these mixed messages, because they know that while the majority of Australians will wait for the confusion to clear, fortunes will be made by those who understand what is really going on in our property markets.

Even if you’ve been to one of our seminars before, please join us because we have no properties to sell – we’ll give you unbiased facts and the perspective you can only get from being in the market for more than 30 years. Click here now to find out more.

Between now and then I’ll keep you up to date with how to take advantage of the changes happening in our property markets in future updates, but it is probably appropriate to remind you that in changing times like we are experiencing, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is independent and unbiased. If you want to find out a bit more about what is happening in your local market and what our research suggests is in store for us, join us at a free property briefing in Melbourne, Sydney and Brisbane or with our associates in Perth. Just click on this link to find out more and reserve your place.

As so much is happening in property nowadays I’ll keep you updated 2 or 3 times a week in my blog – just click Michael’s blog in the top menu items on this page and bookmark it, then come back regularly to keep up to date there, or on the property news page.

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Michael Yardney is a best selling author and one of Australia’s leading experts in the psychology of success and wealth creation through property. He is Australia's most published property author and has probably educated more successful property investors than anyone else in Australia. Go to www.metropole.com.au